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GST Guide for theCatholic ChurchGST Guide for theCatholic Church
Australia
The costs associated with the development of the materials set out in this
resource kit have been funded by the Commonwealth Government's GST Start-up
Assistance Program. The costs of mounting seminars based
on the information contained in the resource kit have also
been funded by the same program.
Designed and Printed by
Colourprint Australia Pty Ltd
203 Arden Street, North Melbourne 3051
Acknowledgment
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Catholic Bishop
Australian Conference
Australian Conference of
Leaders of Religious Institutes
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Important information concerning this material - please read
These limitations and warnings also apply to information based on this material presented at any
seminars or workshops provided as part of the GST Start-up Assistance Program.
This material is provided under the
Commonwealth's GST Start-up Assistance
Program, and is designed to provide general
information on the GST and on business skills,
practices and processes necessary to operate
with the GST, focussed on small and medium
enterprises and the community and education
sectors. Because business circumstances can
vary greatly, the material is not designed to
provide specific GST or business advice for
particular circumstances. Also, because aspects
of the GST are complex and detailed, the
material is not designed to comprehensively
cover all aspects of the GST as it applies to
small and medium enterprises and the
community and education sectors. Further, the
laws implementing GST, and rulings and
decisions under those laws, may change.
Before you use this material for any important
matter for your business, you should:
▲ make your own enquiries about
whether the material is relevant and
still current, and whether it deals
accurately and completely with that
particular matter; and
▲ as appropriate, seek your own
professional advice relevant to that
particular matter.
This material is provided on the understanding
that neither the Commonwealth or its
personnel, nor any other organisation or
person involved in developing or delivering the
GST Start-up Assistance Program, is thereby
engaged in providing professional advice for a
particular purpose.
DISCLAIMER
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General Issues
For a considerable period, the Catholic Church and Religious Orders in Australia have been largely
exempted from taxes in lieu of the not-for-profit service they have provided to society. Whilst this
principle of exemption from taxation has been maintained in The New Tax System to operate from 1
July 2000, the Catholic Church, Religious Orders and their various operating entities will be drawn
into the taxation system for the first time through a process of registration and endorsement of their
individual taxation status.
The centerpiece of The New Tax System is a goods and services tax (GST) that will apply to a wide
range of goods and services. Not all goods and services will be subject to GST. However, there are no
exemptions available to individuals or other entities (religious, charitable, not-for-profit or
commercial). Given these features of The New Tax System, all aspects of the operations of entities
of the Catholic Church and Religious Orders may be subject to the provisions of the GST.
Depending on decisions made by individual entities of the Catholic Church and Religious Orders
regarding registration connected with The New Tax System, many entities will take on particular
periodic reporting responsibilities to the Australian Taxation Office (ATO) for the first time.
This consequence of The New Tax System means that entities within the Catholic Church and
Religious Orders will face a number of challenges. These include the following:
(1) The assimilation of new concepts associated with the manner in which the detail of their
operations are described.
(2) The cash flows of individual entities will be impacted by the GST and the removal of
Wholesale Sales Tax.
(3) Individual entities will need to arrange their affairs to accurately record the collection and
payment of the GST to facilitate the completion of periodic reporting to the ATO.
(4) Individual entities will need to become aware of the specific requirement of the legislation as
regards GST invoices and other matters such as withholding of tax which will have an
important bearing on periodic reporting to the ATO. In this context, entities will need to pay
particular attention to the training of staff and the upgrading of record keeping systems.
(5) Individual entities may need to upgrade the responsiveness of their reporting systems so that
periodic reporting to the ATO is timely, accurate and capable of passing audit by the ATO. In
the past, financial reporting in a commercially orientated time-frame was often a matter of
relatively low priority.
Against the background of these challenges, this reference resource has been prepared. The resource
concentrates on those issues connected with The New Tax System that are of particular concern to
entities connected with the Catholic Church and Religious Orders.
It is important to note that by virtue of the structure of the Church in Australia, and the fact that
the existing structure has developed over a long period without contact with the taxation
system, it will be impossible for every situation connected with The New Tax System and the Church
to be canvassed.
Individual entities are encouraged to develop appropriate working relationships with Diocesan or
Religious Order co-ordinators in developing management techniques to adapt to the new operating
environment precipitated by the legislative requirement of The New Tax System.
I n t r o d u c t i o n
INTRODUCTION
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Contents
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1 1. Objective of the Material 1
2 2. The New Tax System 32.1 The Introduction of Goods & Services Tax 3
2.2 Personal Income Tax Cuts 3
2.3 Pay As You Go (PAYG) 3
2.4 Fringe Benefits Tax Changes (FBT) 3
3 3. Assistance Available for Change to GST 5-73.1 Government Assistance 5
3.1.1 GST Start-Up Assistance Office 5
3.1.2 Australian Taxation Office 5
3.1.3 New Taxation System Advisory Board 5
3.2 Australian Catholic Church Tax Working Group 5-6
3.3 Other Government Organisations 63.3.1 Australian Competition & Consumer Commission (ACCC) 6
3.4 Commonwealth Ombudsman 7
4 4. Introduction and Overview 9-10
5 5. GST Terms and Specific Meanings 11-155.1 Enterprise 11
5.2 Entity 11
5.3 Acquisition 11
5.4 Adjustments 11-12
5.5 Attribution Rules 125.5.1 Cash Basis 12
5.5.2 Accrual Basis 12
5.6 Australian Business Number (ABN) 12-13
5.7 Business Activity Statement (BAS) 13
5.8 Consideration 13
5.9 Creditable Acquisitions 13
5.10 Goods & Services 13-14
5.11 Input Tax Credit 14
5.12 Sub-Entity 14
5.13 Supply 14
5.14 Tax Fraction 15
5.15 Tax Invoice 15
5.16 Tax Period 15
5.17 Value 15
C o n t e n t s
6 6. How the GST Operates 17
7 7. Impact on the Church 19-217.1 Diocesan Parish Priests 19
7.2 Diocesan Assistant Priests, Specialist Priests, Deacons 20
7.3 Diocesan Priest - Chaplains 20
7.4 Religious Orders 20
7.5 Parishes/Religious Congregations - Income 20
7.6 Parishes/Religious Congregations - Expenditure 20-21
7.7 Associated Church Entities 21
8 8. Supply Transactions 23-258.1 Taxable Supplies 23-24
8.2 GST-free Supplies 24-25
8.3 Input Taxed Supplies 25
8.4 Other Supplies 25
9 9. Church Transactions 27-289.1 Religious Services 27
9.2 Charities 27-289.2.1 Non-Commercial Activities 27
9.2.2 Fundraising 27-28
9.2.3 Donations & Gifts 28
9.2.4 Grants 28
9.2.5 Sponsorships 28
10 10. Acquisitions (Purchases) 29
11 11. Specific Requirements for the Church 30-3611.1 Working out the GST 30-31
11.2 Identification of the GST Implications of all Transactions 31
11.3 Record Keeping 31-32
11.4 System Checks 32
11.5 Transaction Analysis 33-36
12 12. Registration and Endorsement 37-3812.1 Registration for an Australian Business Number (ABN) 37
12.2 Registration for GST 37
12.3 Endorsement as a Income Tax Exempt Charity (ITEC) 38
12.4 Endorsement as a Deductible Gift Recipient (DGR) 38
C o n t e n t s
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13 13. Australian Business Number (ABN) Registration 39-40
14 14. GST Registration 41-4314.1 Turnover 41
14.2 Why Register for GST 41
14.3 Registration Implications 42
14.3.1 Charge GST 42
14.3.2 Claim Input Tax Credits 42
14.3.3 Reporting to the ATO 42
14.3.4 Cash Flow Implications 42
14.3.5 Other Implications 42
14.4 Non-Registration Implications 42-43
14.4.1 Cannot Claim Input Tax Credits 42
14.4.2 Cannot Claim a WST Credit 42
14.4.3 Reporting to the ATO 42-43
14.4.4 Constant Monitoring of Turnover 43
14.5 Registering for GST 43
14.6 Cancelling your GST Registration 43
15 15. Form of Registration 45-4615.1 Individual 45
15.2 Grouping 45
15.3 Branches 45
15.4 Non-Profit Sub-Entities 45-46
16 16. Income Tax Exempt Charity (ITEC) Endorsement 47-48
17 17. Deductible Gift Recipient (DGR) Endorsement 49-50
18 18. Registration Sequence 5118.1 Registering Legal Entities 51
18.2 Registering a Non-Profit Sub-Entity 51
18.3 Applying for ITEC & DGR Endorsement 51
18.4 Registering a Branch 51
18.5 Registering a Group 51
19 19. Accounting for GST 5319.1 Cash v Accrual Accounting 53
19.2 Cash Basis 54
19.3 Accrual Basis 54
C o n t e n t s
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20 20. Reporting to the Australian Taxation Office (ATO) 55-5920.1 Tax Periods 55
20.2 Quarterly Reporting 55
20.3 Monthly Reporting 56
20.4 Business Activity Statement (BAS) 57-59
21 21. Systems 61-6321.1 What is a System? 61
21.2 Why are Systems Important? 62
21.3 Why Do Systems Change? 62
21.4 The Operation Cycle 62-63
22 22. Systems & Staff 65-66
23 23. GST Systems 67-7523.1 Supplies & Acquisitions 67
23.2 GST Status of Transactions 67-68
23.3 Source Documents 68-73
23.3.1 Tax Invoices 70-71
23.3.2 Bank Statements 71-73
23.4 Adjustments 73-75
24 24. GST Systems - Recording 77-7924.1 Computer or Manual 78-79
24.2 Income & Expenditure 79
24.3 Irregular Transactions 79
25 25. GST Systems - Reporting 81-82
26 26. Risk Management 8526.1 Misclassifying Supplies 85
26.2 Incorrect Recording & Reporting of GST 85
26.3 Tax Invoices 85
26.4 Cashflow 86
26.5 Contracts 86
26.6 Insurance 86
26.7 Pricing 86
C o n t e n t s
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27 27. Transitional Issues 87-9127.1 Time of Supply 87
27.2 Progressive Supplies 88
27.3 Motor Vehicles 88
27.4 Contracts 89
27.4.1 Non-reviewable Contracts 89
27.4.2 Reviewable Contracts 90
27.4.3 Entity Status 90
27.5 Funeral Agreements 90
27.6 Stock on Hand 91
27.7 Actions Required Now 91
Contacts 92
C o n t e n t s
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The introduction of The New Tax System
including the GST has required the Catholic
Church in Australia to address the issue of
taxation. Previously, the Catholic Church
only had to deal with some of these issues
listed below:
▲ Tax deductibility status;
▲ Sales tax exempt status;
▲ Fringe benefits tax for employees; and
▲ Income tax for employees.
From 1 July, all Catholic Church entities
will be required to pay a business tax
related to that entity's economic activity
and to produce additional financial
statements on a regular basis.
This information therefore, aims to provide
a comprehensive and straightforward
approach for parish/congregational
personnel to deal with the key issues of tax
reform and its implementation within
parish/congregational financial structures
with minimal input from specialist
advisers.
1 . O b j e c t i v e o f t h e M a t e r i a l
1. Objective of the Material
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N o t e s
Notes
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2.1 The Introduction of Goods
and Services Tax
All Australians will be involved with a new
tax system from 1 July 2000. An important
part of The New Tax System will be a goods
and services tax (GST).
GST is a broad-based tax of 10% on the
supply of most goods and services
consumed in Australia. It may affect some
transactions entered prior to that date
where performance occurs on or after 1
July 2000, for example insurance premiums.
The GST will be a visible tax. When goods
and services which are subject to the 10%
GST are purchased, it will be mandatory
for the supplier to indicate that the price
being paid is GST inclusive. This is unlike
many of the existing taxes, such as
wholesale sales tax, where tax may be
included in the price of the goods, but
which is not clearly visible to the
purchaser.
Many existing, hidden, indirect taxes will
be phased out and replaced by the GST.
2.2 Personal Income Tax Cuts
Parishes and congregations employing
staff will need to be aware of the changes
to personal income tax rates.
2.3 Pay As You Go (PAYG)
The New Tax System will consolidate a
number of tax collection systems, such
as Pay As You Earn (PAYE), Prescribed
Payments System (PPS), Reportable
Payments System (RPS) and the Provisional
Tax system, with the PAYG system.
2.4 Fringe Benefits Tax
Changes (FBT)
At the time this document was prepared
changes to FBT were still being finalised.
Consult with your Diocesan or Religious
Order administration to keep yourself
informed of any updates.
2 . T h e N e w Ta x S y s t e m
2. The New Tax System
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TODAY’S TAX RATES NEW TAX RATES
Current Scale Tax Rate New Scale Tax RateTaxable Income % Taxable Income %
$0 - $5,400
$5,401 - $20,700
$20,701 - $38,000
$38,001 - $50,000
$50,001 +
$0 - 6,000
$6,001 - $20,000
$20,001 - $50,000
$50,000 - $60,000
$60,001 +
0.00
17.00
30.00
42.00
47.00
0.00
20.00
34.00
43.00
47.00
The following table shows the new personal income tax thresholds and
revised income tax rates from 1 July 2000.
N o t e s
Notes
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3.1 Government Assistance
3.1.1 GST Start-Up Assistance OfficeThe Government has set aside $500
million to assist small and medium
enterprises, the community sector and
educational bodies (SMECEs) to adjust to
the GST environment.
The GST Start-Up Assistance Office was
established to administer these funds in
consultation with The New Tax System
Advisory Board and two advisory panels;
one covering small and medium
businesses and the other the community
sector and educational bodies.
What kind of assistance is available?
The GST Start-Up Assistance Office has
developed four programmes to help
SMECEs adjust their business practices,
namely:
Organisation-Delivered Assistance
Selected industry and professional
organisations will provide a broad range of
education and information services to their
members and non-members.
Business Skills Education
The GST and Business Skills - an Action
Guide is available now to help you become
GST-ready. The GST Business Assist
Helpline (13 30 88) is open from 9am -
9pm nationally to provide help on the
necessary skills, practises and processes to
prepare you for the GST.
Adviser Education
An education programme for informal
advisers who assist small business,
community groups and educational bodies.
Direct Assistance
Direct assistance will also be available to
small and medium businesses and
community organisations that register for
GST. Redeemable certificates that can be
exchanged for products or services
acquired to assist in the implementation of
the GST will be available.
These four programmes have the common
goal of ensuring that SMECEs have the
opportunity to access information and
assistance to adjust their enterprises to the
GST environment.
3.1.2. Australian Taxation Office
(ATO)The ATO has the role of providing guidance
and assistance with technical changes that
will arise from the introduction of The New
Tax System.
The assistance provided by the ATO
includes a range of publications from
general purpose guides, to industry sector
publications directed at the specific issues
to be addressed by various industries and
community groups.
The ATO is also providing a wide range of
seminars to assist with the introduction
and implementation of the changes.
3.1.3 New Tax System
Advisory BoardTo ensure the successful introduction of
The New Tax System the Government has
put in place a large number of programmes
to assist businesses, community groups,
the educational sector, and the Australian
public prepare for the changes arising from
The New Tax System.
To oversee the changes the Government
has established The New Tax System
Advisory Board. This “Board” has as one
of its most important roles, the oversight of
a major education programme about The
New Tax System for all sectors of Australian
society to assist them with preparations for
the changes that will be necessary.
3.2 Australian Catholic Church
Tax Working Group
The Australian Catholic Church Tax
Working Group (ACCTWG) was formed to
facilitate a national coordinated approach
to deal with tax reform issues as a result of
The New Tax System. There had been a
number of local meetings at diocesan level
between heads of department and tax
experts, followed later by national
meetings. The first national meeting was
3 . A s s i s t a n c e Av a i l a b l e f o r C h a n g e t o G S T
3. Assistance Available for Change to GST
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held on 11 January 1999. Soon after, a
submission was made to the Australian
Catholic Bishop Conference (ACBC) &
Australian Conference of Leaders of
Religious Institutes (ACLRI) for the
formation of a national tax working group.
The ACCTWG was formed in March 1999.
The main aim of the group is to:
▲ Provide a point of reference and liaison
with Tax and Treasury officials;
▲ Assist Dioceses, Religious Orders and
Agencies to define and describe common
issues in dealing with tax reform, in
particular with GST;
▲ To assist in the development of strategy
and policy in response to tax reform;
and
▲ Address issues concerning GST start up
and implementation around Australia.
The ACCTWG has also been actively
involved in meeting with and lobbying,
both government and ATO officials in
matters concerning interpretation and
refinement of tax legislation.
3.3 Other Government
Organisations
3.1.3 Australian Competition &
Consumer Commission (ACCC)The ACCC has specific legal powers to
ensure that there is no price exploitation in
relation to price changes brought about by
The New Tax System changes.
Tax Changes Covered by the Price
Exploitation Guidelines
The ACCC will ensure that there is no price
exploitation in respect of the following
taxation changes:
▲ A reduction in the Wholesale Sales Tax
(WST) rate of 32 percent to 22 percent
(29 July 1999);
▲ Introduction of the GST (1 July 2000);
▲ Abolition of WST (1 July 2000);
▲ Changes to excise on petrol and diesel
and to the Diesel Fuel Rebate Scheme
(1 July 2000);
▲ Changes to excise on alcoholic beverages
(1 July 2000);
▲ Changes to excise on cigarettes (from
1 November 1999);
▲ Introduction of a ‘Luxury Car Tax’
(1 July 2000);
▲ Abolition of bed taxes (1 July 2000); and
▲ Abolition of State taxes on bank
transactions (Financial Institutions Duty
1 July 2001 Debits Tax by 1 July 2002)
and stamp duties on marketable
securities (1 July 2001) and remaining
business stamp duties (date to be
determined).
The ACCC’s Focus in Evaluating Prices
It is the Government’s intention that
consumers should benefit fully from
reductions in indirect tax and should not
be exposed to greater than necessary tax
related price rises. There should be no price
exploitation of consumers.
In line with the Government’s intention,
the ACCC will examine how prices move in
relation to The New Tax System changes.
The ACCC’s focus is on prices set by
individual entities and is primarily on
changes in prices resulting from the tax
changes, not on the level of prices.
Price Exploitation Hotline on
1300 302 502.
Example
Prior to 30 June 2000, Vinnie’s Boutique
purchased a microwave oven for $100
(including WST). They typically added a
50% markup, and sold such items for $150.
With the introduction of GST and the
abolition of WST, a like item would be
purchased for say $88. Eg. The item would
cost $80 and there would be $8 GST.
In a GST environment, the pricing
pattern would become:
Full purchase price 88.00
Less: GST 8.00
Net cost 80.00
Normal dollar margin 50.00
New selling value 130.00
Add: GST 13.00
New selling price 143.00
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3.4 Commonwealth
Ombudsman
The Commonwealth Ombudsman
investigates complaints about
Commonwealth Government Departments
and Agencies. S/he may also recommend
that Departments and agencies provide a
solution or remedy to complaints.
Individuals, businesses, clubs, groups,
community organisations, Commonwealth
grant recipients, charities and others may
have a complaint about the actions or
decisions of government agencies as The
New Tax System is implemented. Where
complaints cannot be resolved directly
with the agency the matter can be raised
with the Special Tax Adviser of the
Commonwealth Ombudsman.
The Ombudsman’s Office has wide powers
to conduct an independent investigation
of complaints. Call the National
Complaints Line on 1 300 362 072.
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N o t e s
Notes
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Introduction Date
GST starts on 1 July 2000; however, it may
affect some transactions entered prior to
that date where performance occurs on or
after 1 July 2000.
Tax Rate
GST is a broad-based tax of 10% on the
supply of most goods and services
consumed in Australia.
Replacement Tax
GST is a visible tax. When goods and
services which are subject to the 10% GST
are purchased, it will be mandatory for the
supplier to indicate that the price being
paid is GST inclusive. Many existing,
hidden, indirect taxes will be phased out
and GST will replace them. (See Chapter
3.3.1 on the role of the ACCC for a listing of
which taxes are being abolished.)
Although GST will replace some existing
taxes, the GST charged to an enterprise by
its suppliers, in many situations, will be
recoverable from the ATO.
A Tax on Transactions -
A Consumption Tax
What is a GST? The main principles are
that it is a tax:
▲ Applied to the domestic Australian
consumption of goods and services, ie
on transactions; and
▲ It is paid by the final consumer.
The first key concept here is domestic
Australian consumption. That means
the GST does apply to imports, but does
not apply to exports
As well, it is about the consumption of
goods and services. So GST is a tax on
goods and services and not on income.
Therefore, an intention to make a profit is
irrelevant in deciding whether an
organisation must pay GST.
No Entities are Exempt from GST
It follows that many organisations that are
not currently considered to be carrying on
a ‘business’ for income tax purposes will
nevertheless be included in the GST net.
Such organisations (which the legislation
calls entities) include church bodies,
charities, trusts, co-operatives, sporting
and other clubs, statutory bodies and local
authorities.
Not all Goods/Services are Subject to GST
GST is not charged, or payable to the ATO,
on GST-free supplies. The major categories
of GST-free supplies are:
▲ Basic food
▲ Medical services
▲ Other health services
▲ Hospital treatment
▲ Residential care
▲ Community care
▲ Private health insurance
▲ Education services
▲ Child care
▲ Exports
▲ Religious services
▲ Farm land
▲ Supplies through inward duty free shops
▲ Supplies of precious metals
▲ Sales of going concerns
(sale of ‘businesses’)
But not all supplies falling into these
categories will be GST-free.
While these general categories of supply
may be GST-free, each has a very specific
meaning. Your supplies need to fall into
those very specific definitions to be GST-
free. Remember - if you make a mistake
and don’t charge GST because you thought
the supply was GST-free, but it later turns
out to be taxable, the GST liability rests
with you not the consumer.
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4. Introduction and Overview
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Be sure you carefully check the details if
you make supplies that fall into these
categories. You may want to seek advice
on the impact of the GST-free rules for your
particular entity from your Diocesan or
Congregational contact, a professional
adviser or the ATO.
If a an entity makes GST-free supplies
however, it is still able to claim back GST
input tax credits on the purchase of any
goods and services acquired to allow it to
make those GST-free supplies.
Example
A priest conducts a funeral service and
receives a stipend. In this situation, the
priest makes a GST-free supply. Though
the priest is making a GST-free supply,
he is still able to claim back the GST paid
on the expenses of running the church
such as telephone, electricity, insurance,
candles, incense, and charcoal.
The GST is Recoverable
If an entity is registered for GST, the GST
paid on acquisitions is recoverable from
the ATO. For unregistered entities the GST
is a cost because it cannot be recovered.
Church entities will need to balance the
likely level of compliance costs against the
cost of absorbing the GST paid on
acquisitions when deciding whether or not
to register for GST. This only applies for
entities connected with the Church and
Religious Orders with annual turnover less
than $100,000.
4 . I n t r o d u c t i o n & O v e r v i e w
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5 . G S T Te r m s a n d S p e c i f i c M e a n i n g s
5. GST Terms and Specific Meanings
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To register for GST you must be an entity
conducting an enterprise. So both of these
terms - enterprise and entity - are central to
the operation of the GST, and are critical in
determining if you are required to register
for GST. We look at these terms in turn.
5.1 Enterprise
Enterprise is about making things happen
and getting things done.
Enterprise manifests itself in many ways.
It may be parishioners grouping together
to raise funds for the parish or it may be
the parish providing a range of services for
those in the community who are in need of
special support and assistance. In a
business context it may be a designer who
has the courage to start her own business.
Enterprise involves planning, organising,
and managing. Enterprise involves both
formal and informal structures. Enterprise
involves people doing things, making
things happen, and providing things.
Enterprise involves everything from the
activities undertaken by Australia’s largest
companies, to the facilities provided to
members by the local parish. Enterprise,
enterprising people, and enterprises deliver
the things that society needs and wants.
In the GST legislation, the term enterprise
is used to describe an activity, or a series of
activities, undertaken by a person or an
organisation. Enterprise is a very
important term in the context of GST
because enterprises that meet certain
criteria are required to register for GST.
It is important to realise that enterprises
that are required to register for GST may
not be ‘businesses’ or ‘organisations’ in the
way those terms are normally perceived.
Enterprise includes:
▲ A business, trade or profession;
▲ A lease, licence or other grant of interest
in property;
▲ Activities of charities or gift deductible
entities;
▲ Activities of religious organisations; and
▲ Certain activities of government and
government corporations.
Some activities are excluded from being an
enterprise. These are:
▲ Hobbies or recreational activities;
▲ Activities by individuals or partnerships
where there is no reasonable expectation
of profit or gain. Input tax credits cannot
be claimed for these activities; and
▲ Employees salaries and wages.
5.2 Entity
In the context of the GST an entity can
include:
▲ An individual (eg a priest/deacon);
▲ A company or Body Corporate (eg a
Religious Order/Congregation);
▲ A Corporation Sole;
▲ A Partnership;
▲ Any other Unincorporated Association
or Body of Persons (e.g. kindergarten
run by a parish); and
▲ A Trust or a Superannuation Fund.
5.3 Acquisition
Acquisitions include everything you buy
for your enterprise including buying goods
or services, getting advice or information,
taking out a lease of premises, hiring
business equipment, and anything else.
5.4 Adjustments
Adjustments are changes you may need to
make on your BAS to change your net GST
amount payable or refundable as the result
of an adjustment event.
An adjustment event is any event that has
the effect of:
▲ Cancelling a supply or acquisition;
▲ Changing the consideration for a supply
or acquisition, or
▲ Causing a supply or acquisition to
become, or stop being a taxable supply
or creditable acquisition.
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5This may occur if:
▲ All or part of a supply or acquisition is
cancelled;
▲ You receive or give a discount on a
supply;
▲ You change the purpose of an
acquisition; or
▲ One of your debtors fails to pay.
5.5 Attribution Rules
When, for any tax period, an entity
completes the GST section of the BAS it is
required to include:
▲ The total amount of taxable supplies
made by the entity during the period; and
▲ The total amount of the taxable supplies
it acquired during the period that relates
to its taxable activity.
It follows that the entity must determine in
which tax period a particular transaction
must be accounted for. This need is covered
by the attribution rules. They determine to
which period a GST supply should be
attributed.
The attribution rules differ depending
whether the enterprise is GST registered on
a ‘cash basis’ or an ‘accrual basis’.
5.5.1 Cash Basis Attribution Taxable supplies made by the entity
GST is attributed to the GST period in
which the entity receives a payment in
respect of the taxable supply.
Taxable supplies acquired by the entity
GST is attributed to the GST period in
which the entity makes a payment in
respect of the taxable supply.
5.5.2 Accrual Basis Attribution RulesTaxable supplies made by the entity
GST is attributed to the first GST period in
which the entity either, receives a payment
in respect of the taxable supply, or issues
an invoice in respect to that supply.
Taxable supplies acquired by the entity
GST is attributed to the GST period in
which the entity receives a tax invoice in
respect of the supply.
In effect, the attribution rules are the
equivalent of GST time of supply rules.
They determine the period in which the
supply is to be regarded as occurring and
in relation to which the applicable GST is
to be accounted for.
Example:
A congregation is registered for GST on a
cash basis. On 24 June it purchased soil
from Jax Garden Yard Ltd for $3,300
(including $300 GST) for landscaping
works at the convent.
Jax Garden Yard Ltd issued the
congregation with a tax invoice for
$3,300 on 25 June which it paid on 4
July. The congregation’s GST tax period
ends on 30 June.
It attributes the supply to the GST period
commencing on 1 July, as it did not
make the payment in the GST period
ended 30 June.
Jax Garden Yard Ltd is registered for GST
on an accrual basis. As it issued an
invoice in the GST period ended 30 June,
it must attribute the supply and the GST
payment to the 30 June GST period.
5.6 Australian Business
Number (ABN)
The ABN is critical to the operation of the
GST system, as every entity that is
registered for GST will have an ABN and
this is the number that must be quoted on
all your tax invoices.
As a general rule entities should register
for an ABN even if they do not register for
GST. If the entity does not have an ABN, or
does not provide that number to people to
whom it supplies goods and services, their
clients ordinarily will be required to deduct
withholding tax from payments to that
business. There are very limited exceptions
to the rule. This withholding tax will be at
the rate of 48.5 cents in the dollar.
The ABN registration form includes the
option to register for GST.
The New Tax System will change the way
tax is collected in Australia from 1 July. As
part of the changes The New Tax System
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5also puts in place an ABN that will enable
entities in Australia to deal with the ATO
and a range of government departments or
agencies using the one number.
If an entity does not obtain an ABN, and
does not register for GST, it will be unable
to claim back the GST that it pays to its
suppliers.
An entity will also need to show its ABN on
the tax invoices it issues. If it doesn’t, the
document will not constitute a tax invoice
(even if so described) and its clients would
not be able to claim input tax credits.
The ABN will not replace a tax file number,
so tax file information will still be protected
by the existing privacy guidelines.
When an entity has been allocated an ABN
its relevant details will be placed on the
Australian Business Register which the
Commissioner of Taxation will administer.
5.7 Business Activity
Statement (BAS)
Every entity that registers for GST will be
required to submit a BAS that will show
not just GST paid or due, but a range of
other taxes as well. The BAS is your GST
return - but it includes a lot more than just
GST.
With the BAS, most parishes/congregations
will make one payment and one statement
to the ATO per quarter. That is, most
entities will only be required to lodge four
returns and make four payments per year.
For parishes and congregations this will
include:
▲ GST;
▲ Income tax withholding (PAYE/PAYG
withholding); and
▲ FBT instalments.
For each tax period the entity will receive
from the ATO a single tax form: the BAS.
As from July 1 the BAS will be used to
advise the ATO of the GST liability of the
entity as well as being used to advise its
other tax liabilities. For most entities this
means that there will only be one form to
the ATO and only one payment each quarter.
The exception will be for entities that
choose to remit GST on a monthly basis.
A BAS will have to be filed when it is
due, even if no tax liability exists for
that tax period.
The BAS can be sent to the entity, by the ATO
either through the mail as a paper form, or
over the Internet as an electronic form. The
entity will be required to lodge its BAS with
the ATO twenty-one days after the end of the
GST tax period. The GST tax period will
either be one month or three months. (This
will be discussed in Chapter 20)
The entity will be required to keep
adequate records so it can accurately
complete the GST section of the BAS to
determine the amount of GST it will have
to pay to the ATO or the amount that may
be refunded, depending on its
circumstances.
Any refunds of GST may be used to reduce
other amounts of tax that may need to be
paid (such as group tax) on the BAS for
that period. The ATO will pay interest on
all refunds not remitted by them within 14
days.
5.8 Consideration
For most entities, the consideration that
they receive for their goods and services
will be the money paid. However, the GST
is intended to be very broad in its coverage,
so consideration extends well beyond
money to include non-cash transactions,
such as barter transactions.
5.9 Creditable Acquisitions
Creditable acquisitions are acquisitions
acquired for a creditable purpose. You
acquire a thing for a creditable purpose if
you acquire it for use in your business,
unless it is for use in making input taxed
supplies. Things acquired for private use
are not creditable acquisitions.
5.10 Goods and Services
The GST is intentionally very broad in its
coverage. It is intended to capture all
forms of domestic consumption, so may
include a range of things that you may not
have thought of. It is important that you
charge GST on all taxable supplies, so you
need to have a good understanding of
what we mean by goods and services.
If you don’t charge GST when you should
have, you as the supplier will still be
required to pay 1/11th of the price charged
to the ATO - so making a mistake can be
very expensive!
Enterprises produce a huge range of goods
and services that are available to
consumers. Goods can be grown, made, or
imported, and can be bought and sold
repeatedly.
Services also come in many different
forms. Services can involve a plumber
fixing a blocked drain, or the local
swimming club teaching the kids to swim.
The local Council, Federal Government,
and the local Citizens Advice Bureau all
provide services. Some services we use are
costly, some cost nothing, and some
organisations provide them in return for
subscriptions and members donations.
Some service organisations are huge,
highly structured, and are ‘big businesses’
to run. Other service organisations are less
formal, less organised, and small. One
thing is common to all enterprises that
provide goods and services, they involve
people in planning, organising, and
managing the supply of a huge range of
goods and services that people consume
every day.
It is very important to appreciate that
for GST to be payable, there must be a
taxable supply of goods and services.
In some cases the goods or services being
supplied may be GST-free, or input taxed.
These are not taxable supplies of goods
and services and accordingly GST is not
included in the price paid (we explain these
terms later).
This material also looks at the supply
of goods and services. It considers what is
being supplied, when is it being supplied,
what is the value of the supply. This
material considers the relationships
between enterprises, their clients, and the
goods and services provided.
5.11 Input Tax Credit
Registered entities can claim back from the
ATO the GST that is included in the price of
goods and services they acquire for the
purpose of making taxable supplies and
GST-free supplies. These are called input
tax credits.
It is critical that every registered entity is
able to keep track of these credits. An
unclaimed input tax credit is a cost to an
organisation.
To be able to claim GST input tax credits,
an entity must hold a valid tax invoice at
the time the input tax credits are claimed
in the BAS.
5.12 Sub-Entity
Charities and gift deductible entities with
small independent branches (sub-entities)
have the option of treating these units as if
they are separate entities for GST purposes.
A sub-entity is considered to be
independent if it keeps its own accounting
records and can be separately identified by
the nature of its activities or by its
location.
Where a sub-entity's turnover is less than
$100,000, it can choose whether to register
for GST. If the sub-entity's turnover is
$100,000 or more, it will have to register
separately for GST.
The election to branch units of an
organisation as sub-entities for GST
purposes cannot be revoked for 12 months.
5.13 Supply
Supply is a broad term and includes selling
goods and services, providing advice or
information, and other transactions.
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55.14 Tax Fraction
Rule of Thumb: The GST is 1/11th of
the price charged or paid.
The tax fraction can be important:▲ In isolating the GST content of a
transaction; and
▲ Identifying the true ‘income’ and
‘expenditure’ of the entity.
Total price includes GSTWhen a parish/congregation enters into a
transaction that is taxable, GST must be
added to the value of the transaction.
Example
The parish bookshop is registered for
GST and sells 10 statues to the parish
school which is also registered for GST.
The value of the supply is $250.00 and
the bookshop adds 10% GST ($25) and
charges the school a price of $275.00.
When the bookshop completes the GST
portion of the BAS it will disclose the
total of its taxable supplies for the tax
period. It will calculate 1/11th (the tax
fraction) of the total price charged to the
school ($25). This will be included in the
total GST reported to the ATO.
The remaining 10/11ths of the price
($250.00) is the gross income that
bookshop receives from the transaction.
When the school completes the GST
portion of the BAS it will disclose the
total amount of its acquisitions. It will
calculate 1/11th (the tax fraction) of the
total price paid ($25). This will be
included in the total GST claimed back
from the ATO. The remaining 10/11ths
($250.00) is the actual acquisition cost
of the item to the school.
5.15 Tax Invoice
A tax invoice is a document usually issued
by the supplier. A tax invoice includes the
information normally shown on an invoice
plus additional information required by
GST law, including:
▲ The ABN of the supplier;
▲ The value of the supply;
▲ The amount of GST; and
▲ The total price, including GST.
5.16 Tax Period
Tax periods are the reporting period for
GST on your BAS. Tax periods are monthly
or quarterly. A BAS must be lodged for
each tax period.
5.17 Value
In a GST context, references to the value of
something means the price of an item
before GST is added. Thus, GST
publications often make reference to
adding GST to the value of the item to
arrive at the ‘GST inclusive price’. In the
context of most GST taxable supplies, the
use of the term value, means 10/11ths of
the price. The final 1/11th is the GST
component of the price.
Example
In the above example, the value of the
statues sold by the parish bookshop to
the school is $250. Likewise the value
of the statues to the school is $250.
N o t e s
Notes
16G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
Broadly speaking in the case of GST
registered entities:
▲ GST is a tax of 10% on consumption, i.e.
most transactions; and
▲ Most entities will charge and collect the
GST.
▲ Entities pay the GST on the acquisitions
to their operations; and
▲ Claim a credit from the ATO for the GST
paid on the items purchased or acquired
to use in that entity.
▲ GST is levied on each taxable supply by
registered entities; and
▲ The registered entity will report to the
ATO the GST movements on a BAS.
Unlike sales tax there is no provision for
exempt bodies such as Public Benevolent
Institutions to provide exemption
certificates to the vendor.
There are a number of detailed rules,
which modify this basic position.
6 . H o w t h e G S T O p e r a t e s
6. How the GST Operates
G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
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17
N o t e s
Notes
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The key elements of the introduction of
GST, as a component of the New Tax System,
for a parish/congregational entity are:
1)GST is a tax on goods and services and
not a tax on income. Therefore, it
follows that parishes/congregations that
are not currently considered to be
carrying on a business for income tax
purposes will nevertheless be included
in the GST net.
2)No entity will be exempt from GST.
3)A parish/congregation may be required
to register for GST.
3)A registered entity must include 10%
GST in the price of ‘taxable supplies’.
4)A parish/congregation will find that GST
is included in the prices charged to it by
its suppliers for many of the goods and
services it purchases.
5)Parishes/congregations need to start
preparing now to become accustomed to
the system by:
▲ Providing education and training
for all personnel involved in the
implementation of GST;
▲ Recognising the importance of systems
and record keeping required to account
for the GST (addressed in Chapter 21);
▲ Recognising the impact GST will have
on staff, particularly the additional
responsibilities;
▲ Identifying the GST implications of all
transactions;
▲ Identifying transitional issues;
▲ Review all contracts (obtain advice from
the Diocesan or Congregational contact);
▲ Identifying risks that may arise as a
consequence of GST;
▲ Recognising the importance of an
appropriate Chart of Account; and
▲ Ensuring that the appropriate
documentation is printed and available
for use by staff from 1 July 2000.
7.1 Diocesan Parish Priests
GST does not apply to:
▲ First (or Second) Collection at Masses –
as these are donations. Further, the
supply of religious services are GST-free
provided they are considered essential to
the practice of the religion;
▲ Christmas & Easter dues; and
▲ Stole fees or stipends for masses,
weddings, baptisms, funerals.
Diocesan Priests are able to and may have
to register for an ABN because they
conduct an enterprise:
▲ Being their vocation;
▲ Having an expectation of profit or gain;
and
▲ Are not employees for PAYE (PAYG).
If registered for an ABN, diocesan priests
may in some cases subsequently register for
GST. This would allow them to claim input
credits on creditable acquisitions such as:
▲ Theological library books;
▲ Clerical robes; and
▲ Car expenses (excluding private running).
It will be important for priests to maintain
records and lodge BAS returns with the ATO.
However, diocesan priests cannot claim
input credits on such things as:
▲ Holidays;
▲ Private car expenses;
▲ Newspapers and subscriptions for
periodicals that are “non-theological”; and
▲ Personal clothing.
Subsequent registration for GST involves
meeting all the legislative requirements eg.
income level thresholds, etc. If, under the
legislation, there is no requirement to
register for GST, and if the claim on input
credits are only minimal, it may be more
beneficial not to register for GST.
It is important that diocesan priests consult
the Diocesan Business Manager for advice
and information on clergy registration issues.
7 . I m p a c t o n t h e C h u r c h
7. Impact on the Church
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7.2 Diocesan Assistant Priests,
Specialist Priests, Deacons
May have to register for an ABN.
Subsequently may register for GST to claim
input credits but it may not be worthwhile
to register for GST – see implications for
Parish Priests.
▲ Stipend is not subject to GST; and
▲ GST free income – weddings, baptisms
and funerals.
7.3 Diocesan Priest-Chaplains
Same as for specialist priests but if
registered for GST:
▲ Grants received from governments are
taxable for GST; and
▲ Can claim input credits for creditable
acquisitions.
7.4 Religious Orders
▲ Offerings for religious services &
donations are GST-free to the Order.
This does not include stipends, which
are payments made to the Religious
Order/Congregation for a service;
▲ The Religious Order may claim input
credits except for entertainment and
purchases made from the personal
allowance provided by the Order.
7.5 Parishes/Religious Order
Enterprises – Income
GST applies to:
▲ Piety stall sales (refer to Chapter 15.4
Non-Profit Sub-Entities);
▲ Cake stalls (refer to Chapter 15.4 Non-
Profit Sub-Entities);
▲ Sponsorships where a local entity makes
a donation to the parish/congregation in
return for a service such as advertising;
and
▲ Rental of parish/congregational
premises (eg parish hall, parish tennis
courts, etc).
GST does not apply to:
▲ (First or) second collection see
explanation in section 7.1 Diocesan
Parish Priests;
▲ Rental of residential accommodation
where the rent is below the threshold.
(The threshold at the time of printing is
75% of the market value rent or the cost
of providing the accommodation.); and
▲ Proceeds from the sale of votive candles.
The ATO has also ruled that the following
services would, generally, be religious
services and thus GST would not apply:
▲▲ Home church group activities;
▲▲ Bible study groups;
▲▲ Sunday school;
▲▲ Chaplaincy services;
▲▲ Religious conferences & seminars;
▲▲ Theological training; and
▲▲ Leadership training activities
(subject to them being considered
essential to the practice of the
Catholic religion).
7.6 Parishes/Religious
Congregations -
Expenditure
GST payable – (input credits claimable):
▲ Church expenses including insurance;
▲ Presbytery/Monastery/Convent costs;
▲ Office equipment;
▲ Maintenance costs; and
▲ Purchase of candles & piety stall stock.
No GST payable on:
▲ Interest paid; and
▲ Collections – eg. Good Friday & Peters
Pence collections (donations).
7 . I m p a c t o n t h e C h u r c h
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7 . I m p a c t o n t h e C h u r c h
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7.7 Associated Church Entities
If registered for GST:
GST applies to:
▲ Government grants;
▲ Membership fees; and
▲ Sale of publications.
GST does not apply to:
▲ Donations; and
▲ Grants with no ultimate benefit to the
grantor.
Input tax credits claimable on creditable
acquisitions, for example:
▲ Insurance;
▲ Office costs;
▲ Office equipment; and
▲ Purchase of stocks for resale.
A practical illustration of the GST effect on a congregation’s incomeand expenditure is outlined below:
A practical illustration of the GST effect on a parish’s income andexpenditure is outlined below:
Note: If you are not registered for GST you cannot add GST to the price of goods and services you supply andyou are not entitled to claim input tax credits for GST included in the price of your purchases.
INCOME GST STATUS GST PAYABLE TO ATO
Second Collection Offering
Other Donations
Sale of Books, Religious Items
No
No
Yes
Gift
Gift
Taxable
INCOME GST STATUS GST PAYABLE TO ATO
Stipends
Donations
Interest
Yes
No
No
Taxable
Gift
Input Taxed
EXPENDITURE GST STATUS GST INPUT CREDIT CLAIMED
Insurance
Repairs and Maintenance
Motor Vehicle Expenses
Yes
Yes
Yes
Taxable
Taxable
Taxable
EXPENDITURE GST STATUS GST INPUT CREDIT CLAIMED
Salaries
Purchase of Books, Religious Items
Insurances
Repairs & Maintenance – Church
Interest on Borrowings
Planned Giving Expenses
Electricity
Printing of Church Bulletin
No
Yes
Yes
Yes
No
Yes
Yes
Yes
GST-free
Taxable
Taxable
Taxable
Input Taxed (no GST)
Taxable
Taxable
Taxable
N o t e s
Notes
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GST is a tax on transactions. For GST
purposes sales transactions are called
supplies.
As part of preparations for dealing with the
GST a parish/congregation should identify
the supplies it makes and the GST status of
those supplies.
There are four kinds of supply which are
described in the following pages. In
summary they are:
Taxable SuppliesThe supplier charges GST on sales they
make and can claim full input tax credits
for GST paid on purchases.
Taxable supplies made by an entity
could include:
▲ Resale of purchased furniture, clothes etc
▲ Sale of a commercial building; and
▲ Ministry of an individual religious for
which a stipend is paid.
Taxable supplies acquired by an entity
could include:
▲ Purchase of computer equipment;
▲ Repairs to a motor vehicle used in
ministry; and
▲ Services such as telephones, electricity
and gas.
GST-free SuppliesThe supplier does not charge GST on sales
they make and can claim full input tax
credits for GST paid on purchases.
GST-free supplies made by an entity could
include:
▲ Sale of donated goods that retain their
original character; and
▲ Providing a religious ceremony.
Input Taxed SuppliesThe supplier does not charge GST on sales
they make and cannot claim input tax
credits for GST paid on purchases made to
make those sales.
Input taxed supplies made by a
business could include:
▲ Renting a house as a residence at full
market rate.
To avoid any confusion later on, make
a mental note now that input taxed
supplies are not the same as input tax
credits. Input taxed supplies have just
been described. Input tax credits are
the credits allowed for GST paid on
expenses incurred to make taxable or
GST-free supplies.
Other Supplies(Supplies by Non-Registered Persons)
The supplier does not charge GST on sales
they make and cannot claim input tax
credits for GST paid on purchases.
8.1 Taxable Supplies
Entities that are registered for GST must
charge GST on their taxable supplies, and
will be entitled to input tax credits on the
GST they have paid on purchases to make
those supplies.
It is critical that every registered entity
understands this. Failure to charge GST
when it should have will result in a
liability for GST of 1/11th of the price
charged. Failure to track creditable
acquisitions will result in an under
claiming of input tax credits. That is real
money down the drain!
Supplies of goods and services are made by
entities to their clients. In broad terms
supplies include all forms of supply of
goods and services.
A taxable supply specifically excludes
supplies that are GST-free, and supplies
that are input taxed. Consequently GST is
not charged on either GST-free supplies or
input taxed supplies. (These terms will be
considered shortly).
For the supply of goods or services to be a
taxable supply, it must be connected with
Australia. This means that, generally,
anything done or made in Australia will be
subject to GST. If you have transactions
that relate to exports then the rules are
more complex. You may need to seek advice
from the ATO or a professional adviser.
To be a taxable supply the supply
must involve consideration. In this
8 . S u p p l y Tr a n s a c t i o n s
8. Supply Transactions
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context it is important to appreciate that a
barter transaction, or an exchange of
goods or services is a taxable supply, if one
or both of the parties to the transaction is
GST registered.
Finally it is important to appreciate the
supply of goods or services is only a
taxable supply if all of the above
conditions apply, and the enterprise is, or
should be, registered for GST.
GST at the rate of 10% is added to the value
of taxable supplies (making it 1/11th of the
total price).
Entities purchasing goods for resale must
make allowance for GST charged on the
acquisitions when establishing the sale price.
Consideration
For most entities, the consideration that
they receive for their goods and services
will be the money paid. However, the GST
is intended to be very broad in its coverage,
so consideration extends well beyond
money to include barter transactions.
It is important to remember that where a
supply is made for consideration, even if
that is not for money, the GST must be
accounted for in the usual way.
In broad terms consideration is something
given or received in return for the goods
and services that are purchased or sold by
an entity. Barter transactions, for example,
do not include money. In the case of barter
transactions, goods may be supplied in
return for other goods, or for services. In
others words, in a barter transaction, value
is both given and received. However it is
important for entities to realize that a GST
liability arising from barter transactions,
may be payable in cash to the ATO if not
offset by input tax credits.
Example
A local painter agreed to paint the parish
hall in exchange for $550 worth of
advertising in the parish newsletter. No
cash is exchanged in this transaction.
Despite this both the parish and the
painter must issue a tax invoice.
The parish can claim a $50 input tax
credit using the tax invoice issued by the
painter. The painter has a GST liability
of $50 to the ATO.
The painter can claim a $50 input tax
credit using the tax invoice issued by the
parish. The parish has a GST liability of
$50 to the ATO.
8.2 GST-free Supplies
GST is not charged, or payable to the ATO,
on GST-free supplies. The major categories
of GST-free supplies are:
▲ Basic food
▲ Medical services
▲ Other health services
▲ Hospital treatment
▲ Residential care
▲ Community care
▲ Private health insurance
▲ Education services
▲ Child care
▲ Exports
▲ Religious services
▲ Farm land
▲ Supplies through inward duty free shops
▲ Supplies of precious metals
▲ Sales of going concerns (sale of
businesses)
But not all supplies falling into these
categories will be GST free.
While these general categories of supply
may be GST-free, each has a very specific
meaning. Supplies need to fall into those
very specific definitions to be GST-free.
Remember - if a mistake is made and GST
is not charged on a taxable supply, the GST
liability rests with the entity not the client.
8 . S u p p l y Tr a n s a c t i o n s
24G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
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8 . S u p p l y Tr a n s a c t i o n s
25G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
8Be sure you carefully check if you make
supplies that fall into these categories. You
may want to seek advice on the impact of
the GST-free rules for your particular entity
from your Diocesan or Congregational
contact, professional adviser or the ATO.
If an entity makes GST-free supplies
however, it is still able to claim back GST
input tax credits on the purchase of any
goods and services acquired to allow it to
make those GST-free supplies.
8.3 Input Taxed Supplies
The major categories of input taxed
supplies are:
▲ Residential rents where the rent charged
is at market rates. Where the rent
charged is less than the threshold (at the
time of printing, the threshold is 75% of
the market rent or the cost of the
accommodation), the supply will be a
GST-free supply.
NOTE that if a supply is GST-free,
this overrides the fact that it would
have been an input taxed supply;
and
▲ Financial services.
Most organizations won't make input
taxed supplies, although some will be
providing residential accommodation.
An entity cannot charge GST on any input
taxed supplies it makes, and cannot claim
back any GST on acquisitions made in
relation to those supplies.
If an entity supplies input taxed supplies in
addition to taxable supplies and/or GST-
free supplies, input tax credits must be
apportioned. This apportionment is
required as no input tax credit is available
for the GST paid on acquisitions used in
making input taxed supplies. If your entity
makes input taxed supplies and input tax
credits need to be apportioned, seek advise
from your Diocesan or Congregational
contact, a professional advisor or the ATO.
Example
A large religious organisation owns
several residential properties which it
rents out at market rentals to raise
funds. As the landlord, it is making
input taxed supplies.
Because the landlord is providing an
input taxed supply, it is unable to claim
back any GST that may be included in
the costs incurred in relation to those
properties. This would include the price
of repairs to the property, rates, or
insurance. This is illustrated below.
Residential rent
received by organisation $10,000
Plus: GST n/a
Total rent received $10,000
Less: Landlord’s costs
Repairs (including GST) $1,100
Insurance (including GST) $550
Total costs $1,650
Surplus $8,350
The $1650 costs include $150 GST
(being 1/11th of $1650). The landlord
cannot recover the $150 GST as an input
tax credit. This is because the residential
rent is treated as input taxed. The $150
is therefore an added cost to the
organisation.
Note – the renting of commercial
property is a taxable supply. Therefore,
if the religious organisation owned and
rented commercial property they would
charge GST on the rent and could claim
any GST included in the costs incurred
in relation to those properties.
8.4 Other Supplies
Supplies by Non-Registered Persons:
▲ No GST on supplies they make; and
▲ May not claim input taxed credits.
Wages and salaries paid to employees and
superannuation contributions paid on
behalf of employees are not subject to GST.
It is important to determine the status of
suppliers. The legislation requires that
registered entities (either ABN only or GST)
withhold 48.5% of any amounts greater
than $50 paid to a supplier who does not
have an ABN.
N o t e s
Notes
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9.1 Religious Services
The supply of religious services by a
religious institution or entity will be GST-
free if the services are:
Integral to the Practice of the Religion
This includes:
▲ Religious celebrations such as mass,
funerals, marriages and baptisms;
▲ Chaplaincy services, religious
conferences and seminars; and
▲ Theological training, adult faith
education, after school catechism.
"Religious Service" is not confined to a
service inside a church.
The ATO has also ruled that the following
services would, generally, be religious
services and thus GST-free:
▲ Home church group activities;
▲ Bible study groups;
▲ Sunday school;
▲ Chaplaincy services;
▲ Religious conferences & seminars;
▲ Theological training; and
▲ Leadership training activities (subject to
them being considered essential to the
practice of the Catholic religion).
Not Considered to be Integral to the
Practice of Religion:
▲ Car hire and purchase of flowers for a
church wedding;
▲ Religious items
– a bible for private devotion;
▲ Youth camp
– if mainly social/ recreational; and
▲ Friendship clubs.
9.2 CharitiesA charity is an organisation that
undertakes charitable activities. Activities
are charitable if they benefit the community
or section of the community through:
▲ The relief of poverty or sickness or the
needs of the aged;
▲ The advancement of education;
▲ The advancement of religion; or
▲ Other purposes beneficial to the
community.
Religious charities include:
▲ Churches;
▲ Seminaries;
▲ Religious orders;
▲ Organisations for maintaining clergy/
religious; and
▲ Organisations for spreading religious
doctrine and practice.
While most supplies made by charities will
be taxable, certain non-commercial
supplies will be GST-free.
9.2.1 Non-Commercial ActivitiesNon Commercial Activities are GST-free if
the following conditions are met:
▲ All activities provided at no cost;
▲ Supplies sold for less than 50% of the
GST inclusive market value of the item or
less than 75% of the cost of the supply;
▲ Supplies of accommodation provided for
less than 75% of the GST inclusive
market value of the supply or less than
75% of the cost of providing the
accommodation; and
▲ Sales of donated second hand goods
that retain their original character.
The Treasurer has recently requested the ATO
issue a ruling to clarify that newsletters,
magazines and journals sold by charities,
which are not commercial sales are GST-free.
Supplies that do not meet the above
conditions are generally taxable supplies.
9.2.2 FundraisingGST is generally payable on fundraising
activities. The GST treatment varies
depending on the nature of the activity and
the registration option chosen by your
organisation. Registration options, including
sub-entities, will be discussed in Chapter 15.
If fundraising activities are undertaken by
a sub-entity that is not registered for GST
no GST will be accounted for on sales.
However, GST paid on acquisitions will
become an expense.
If the fundraising activities are undertaken by a
GST registered entity the general rules will
apply. Activities such as fetes, cake stalls and
fundraising dinners will entail taxable supplies.
If an entity is registered any purchase, such
as items for a raffle, or chocolate for a
9 . C h u r c h Tr a n s a c t i o n s
9. Church Transactions
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9
chocolate drive, are creditable acquisitions.
Raffles, bingo and other games of chance
conducted by Church entities will be GST-free.
9.2.3 Donations and GiftsGST will not be payable provided that
the donation is both voluntary and
unconditional. There must be no services,
benefits or rights afforded to the donor as
any of these might be construed as a
‘consideration’ (see Chapter 8.2) and turn
the transaction into a taxable supply.
A gift must be given by a donor out of
generosity or benefaction. A gift is made
voluntarily with no material benefit
provided to the donor as a result of the gift.
Donations given for a specific purpose will
not give rise to a GST liability provided
they are in the nature of a gift.
9.2.4 Grants
Is GST payable on a grant?
The answer to this question depends on the
nature of the grant. If it is for a specific
purpose then it will be subject to GST. The
ATO has issued a specific ruling on this area.
The Commonwealth Government has
indicated that it may “gross up” the grants so
that organisations should receive the same
amount after GST effects are eliminated.
The grants received from the government
are treated as being a payment for services
provided by your organisation. You are, in
effect, invoicing the government for these
services and the service is subject to GST.
This is so even though you then supply the
services as GST-free supplies to your clients.
Conditional grants made to a registered
grantee will usually be subject to GST. A
grant will be subject to GST if the following
four tests are satisfied:
1) Is the grant consideration for a supply
by the recipient to the grantor?
2) Is the supply to which the grant relates
made as part of the recipient’s enterprise?
3) Is the supply for which the grant is paid
connected with Australia? and
4) Is the recipient of the grant registered, or
required to be registered, for GST?
1. Grant as consideration for supply?
The first test can be answered by
considering whether the grant is
conditional or unconditional. If the
recipient undertakes or is required to do
something in exchange for the funds the
grant is a taxable supply.
While a gift to a non-profit body is not
consideration and so not subject to GST,
most grants are not gifts. However, in
some instances grants can be non-
conditional and will be GST-free.
2. Enterprise
The second test asks whether the supply
by the recipient is made in the course of
the recipient’s enterprise. All activities of
a religious institution or a charitable
institution or fund, fall within this test.
3. Connected with Australia
The third test requires that the supply is
connected with Australia. Most supplies
for which grants are consideration are
supplies other than of goods or real
property, that is, services. The supply of
services is connected with Australia if
the service is done in Australia or is
made through an enterprise carried on
in Australia. The ATO will issue a ruling
on the meaning of “connected with
Australia” in the near future.
4. Is the grantee registered?
The last test requires the supplier to be
registered, or required to be registered,
for GST.
9.2.5 SponsorshipAmounts paid as sponsorship fees are usually
payment for services (such as advertising)
and will be subject to GST if the sponsored
entity is registered for GST. If the organisation
supplying the service (such as advertising) is
registered or required to be registered for GST,
the organisation paying the sponsorship fee
will be entitled to an input tax credit of 1/11th
of the payment if it is registered. If the entity
supplying the services is registered it will be
liable to pay GST on the supply.
Non-monetary Sponsorship
If a sponsor provides goods and services in
return for other goods and services, such
as advertising or promotion, there is a
supply by both parties to each other. This is
called 'contra sponsorship'. If both parties
are registered for GST, each will be liable to
pay GST on the supply to each other.
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29G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
Parishes/congregations can claim back
from the ATO the GST that is included in
the price of goods and services they acquire
for the purpose of making taxable supplies
and GST-free supplies. To be able to claim
GST input tax credits the organisation
must hold a valid tax invoice in respect of
the goods or services at the time the input
tax credits are claimed in the BAS.
An organisation, however, cannot claim
back GST that is included in the price of
supplies that it acquires for private or
domestic use.
Purchases Of Goods and Services
Input Tax Credits claimed
Input tax credits are available to entities
registered for GST purposes.
The input tax credit is the GST paid on the
purchases of goods and services used by
the entity. For example, a parish would
claim input tax credits for the following
‘purchases’ it may have made:
▲▲ Parish and Presbytery Outgoings
– Cleaning, Repairs and Maintenance,
Electricity, Insurance, Gas and rent
paid for premises.
▲▲ Stipend Payments – Stipends paid
to Religious Congregations and
Orders.
▲▲ Operating Expenses – Telephone,
Printing and Stationary, Parish
goods and supplies, Book purchases,
Motor Vehicle Expenses, Subscriptions
and Accounting Fees.
▲▲ Capital Expenditure – Equipment
and furniture, Building renovations.
Input Tax credits are available where
GST is charged and a tax invoice is
supplied.
In order for an entity to claim back the
input tax credit it must ensure that the
supplier (who is registered for GST
purposes) of the goods or services provides
a Tax Invoice.
▲▲ The Tax Invoice must be in the
form that complies with the GST
Legislation;
▲▲ The Tax Invoice is the proof as to
the GST paid on the goods and
services supplied;
▲▲ The Tax Invoice must be supplied to
the entity within 28 days;
▲▲ The Tax Invoice is used to make
payment to the supplier for the
goods and services provided.
Tax Credits not claimedAn entity cannot claim input tax credits for
goods and services where:
▲▲ No tax invoice is provided.
▲▲ Supplies are from a non-registered
GST organisation.
▲▲ Goods are consumed for private or
domestic purposes.
▲▲ Goods are used in making input
taxed supplies.
▲▲ The input tax credits are precluded
by legislation.
1 0 . A c q u i s i t i o n s ( P u r c h a s e s )
10. Acquisitions (Purchases)10
1 1 . S p e c i f i c R e q u i r e m e n t s f o r t h e C h u r c h
11. Specific Requirements for the Church
30G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
11
The following example has been tailored
specifically for a parish. However, the
principles demonstrated in the example
can be applied in an analysis for any type
of activity within the Catholic Church.
11.1 Working out the GST
Parishes will be required to allocate extra
staff to properly account for the GST and
maintain proper accounting records.
In order to work out the GST the parish
must identify all transactions and how
GST is applied.
IncomeParish income must be classified into four
types of supplies, namely:
▲ Income that is a taxable supply where
1/11th of receipts is paid to the ATO.
▲ Income that is GST-free that relate to the
supply of religious services.
▲ Income that is an input tax supply
where no GST is charged.
▲ Income that is not a supply for
consideration which is mainly
donations.
ExpenditureParish expenditure must be classified into
the following categories to complete the
information required in the BAS.
▲ Capital expenditure needs to be recorded
separately in the parish accounting
records (cash book or computer
accounting system) to be reported on the
BAS;
▲ The purchase of goods and services where
GST is included in the purchase price;
▲ Expenditure (acquisitions) with no GST
in the purchase price paid;
▲ Expenditure relating to input tax
supplies;
▲ Expenditure that relates to salary &
wages is shown separately;
▲ Expenditure that is used for private use
or is a not allowable as a tax deduction.
Summary Table of Income (Detailed Transaction Analysis in Chapter 11.5)
NATURE OF DETAILS BASINCOME
Donations
Supply of ReligiousServices
Raffles & Bingos
Non CommercialSales
Taxable Supplies
Input Tax Supplies
Planned Giving Envelopes,Loose Collection,Shrines/Candles, Bequests,Diocesan Subsidies, Surplus fromNon-Profit Sub Entities
Income Received for ReligiousCeremonies (Wedding, FuneralBaptisms etc)
If does not contravene StateGambling Laws
Donated Second Hand GoodsGoods sold less that 75% of costor 50% of market value.Sale of internal newsletters andmagazines
Rent received fromSchool/Business.Commission Received.Book & goods sold.Advertising in newsletter.Sponsorship, Government Grants,Sale of Assets
Rent Received from Individuals,Interest from Bank Accounts
Not a supply for consideration notincluded in BAS
GST-free
GST-free
GST-free
Taxable supply where 1/11th ofreceipts is paid to the ATO.
Input taxed
Note: That it is assumed in the above Income Analysis that all fund raising activities of the parish are conductedby the establishment of Non-Profit Sub Entities where the income raised is not subject to the GST andthe net surplus after expenses is donated to the parish.
1 1 . S p e c i f i c R e q u i r e m e n t s f o r t h e C h u r c h
31G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
11
11.2 Identification of the GST
Implications of All
Transactions
All parish transactions must be identified
for GST purposes to be recorded properly in
the accounting records. This is necessary
to ensure the GST payable and receivable
from the ATO is correct under the GST
Legislation and for the information
required in the BAS.
The transaction analysis in Chapter 11.5
outlines income and expenditure that is
incurred by a parish for GST purposes.
11.3 Record Keeping
Parishes should keep accurate records for
the following:
Income - Taxable Supply (a) Where there is a liability for GST ensure
that sale receipts are marked with GST
component of the total sales amount and
entered into the accounting records on a
daily basis;
(b) Where there is a requirement to issue a
tax invoice for a taxable supply to a
registered entity for GST purposes ensure
that the invoice complies with the GST
Legislation;
(c) The accounting system (computer based
or manual cashbooks) should separately
record each transaction where GST is
payable to the ATO.
Expenditure – Input Tax Credits(a) Where GST is paid on the purchase of
goods and services ensure that a proper
tax invoice is received from the supplier
before payment is made. Check that the
GST component is correct on the tax
invoice where possible;
NATURE OF DETAILS BAS STATEMENTEXPENDITURE
CapitalExpenditure
Taxable Supplies
Input Tax Supplies
Private Use /NonTax Deductible
Non TaxableSupplies
Donations
Salary & Wages
Equipment Purchases >$300,Renovations to Building
All Operating Expenses (Property& Operating costs) where GST isincluded in the purchase price
Bank Charges, Interest paid andexpenditure relating to Residential Housingwhere the rent is charged at market rates
Entertainment Expenses, Food
Rates & Taxes, Payments topersons not registered for GST
Payments to Building Funds,Contribution to Bishop’s Fund
Paid to Lay Staff
Capital Acquisition
Creditable Acquisition
Acquisitions for Input Tax Sales
Private Use of Acquisitions
Acquisitions with no GST in price
Not a Supply for considerationNot included in BAS
Salary & Payments
Summary Table of Expenditure (Detailed Transaction Analysis in Chapter 11.5)
1 1 . S p e c i f i c R e q u i r e m e n t s f o r t h e C h u r c h
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11(b) Before an order is made for goods and
services check with the supplier on his
status for GST purposes;
(c) The accounting system (computer based
or manual cashbooks) should separately
record each transaction where GST is
refundable from the ATO.
Record all InflowsAs parishes operate on a cash basis for the
recording of all receipts ensure that
bankings are made promptly and
reconciled to the bank statement and
supporting records, (eg sale receipts).
File Tax Invoices receivedParishes should be aware that their
accounting records and supporting
documentation will be subject to ATO
audits for compliance with GST
Legislation. Tax invoices in particular
require proper filing for inspection as they
are the proof for the GST paid and
subsequently claimed as input tax credits
in the BAS. Filing is normally done in a
cash payments system in cheque number
order.
Keep all Bank StatementsParishes should keep all bank statements
and agree banking details (receipts and
cheques presented) to supporting records.
Record Debtors and Creditors.Where parishes use an accrual basis of
accounting, tax invoices for debtors should
be issued in the correct accounting tax
period.
Similarly for creditors, the recording of
liability for payment should occur when a
tax invoice is received from the supplier.
This is the tax period when the GST can be
claimed.
Keep Records Up-to Date
It is important that the accounting system
for parishes is kept up-to date on a regular
basis:
(a) For receipts, the money is banked daily
and recorded in the accounting system on
a daily basis;
(b) For payments, cheques are drawn when
payments are due to the supplier and
recorded in the accounting system on a
daily basis; and
(c) Bank reconciliation of the cash book
balance with external bank statement is
performed on a regular basis. As a
minimum it should be performed on a
monthly basis.
Ensure GST information and records
are accurate and readily available
when required
Parishes are required to keep the following
accounting records for five years:
(a) Receipts, including records of supplies,
tax invoices issued, cash register (till) Z-
totals, deposit books and bank statements;
(b) Payments, including purchases and
expenses documentation, tax invoices
from suppliers, cash payments records,
petty cash records, cheque butts and a log
book for car expenses;
(c) Tax Adjustment Notes where used;
(d) Payroll records including employment
declarations, PAYE employer’s payment
books and superannuation records;
(e) Cash Payments & Receipts Books either
manual or computer based; and
(f) BAS and supporting audit records to
support GST calculations.
11.4 System Checks.
(a) The accounting system (computer
based or manual cash books) should record
the GST payable to the ATO separately so
that this amount at the end of the quarter
or month agrees with the BAS.
(b) The accounting system (computer
based or manual cashbooks) should record
the GST receivable to the ATO separately so
that this amount at the end of the quarter
or month agrees with the BAS.
1 1 . S p e c i f i c R e q u i r e m e n t s f o r t h e C h u r c h
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11
Types of Activity-GST Impact
BAS Expenditure TaxableInput Taxed
Not GST Related
Documentation and Status of Transaction Notes
DONATIONS No Donations by Parish General Donations Donation No Invoice Not shown on BAS School Building Fund Donation No Invoice Not shown on BAS
OTHER OPERATING COSTS
Yes Communications Telephone /Fax Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
Post Yes Post office will absorb GST 1/11th of cost of supply and serviceFreight/Courier Yes Tax Invoice from SupplierInternet/E-Mail Yes Tax Invoice from Supplier
Yes Printing & Stationary Stationary Supplies Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
Printing Costs Yes Tax Invoice from Supplier 1/11th of cost of supply and serviceBooks & Articles (for sale & use) Yes Tax Invoice from Supplier
Yes Religious Workshop & Supplies Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
Inc Leadership Books 1/11th of cost of supply and service
No Diocesan Contribution Tax for Diocesan Services Yes No Consideration Contributions are made for generalCo- Responsibility Yes No Consideration purposes for use by the Diocese or
Contribution to Priest Fund Yes No Consideration Priest Fund - Not shown on BASSpecific Contribution to Priest Fund Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
Yes Planned Giving Expenses 1/11th of cost of supply and serviceProgram & Stationary Costs Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
1/11th of cost of supply and serviceInsurance Premium
Yes Motor Vehicle Insurance Yes Tax Invoice required, must inform CCI Record in cash book "GST Receivable"Yes Contents - Insurance Yes the extent to which input tax credits are 1/11th of cost of supply and service
claimed for GST when policy is renewed.Yes MV Third Party Property Insurance (State) Yes Cannot claim until 01/01/2003 Cost to parish
Types of Activity-GST Impact
BAS Expenditure TaxableInput Taxed
Not GST Related
Documentation and Status of Transaction Notes
SALARIES COSTSYes Salaries Yes No Invoice Shown separately on BASYes Salaries on costs (LSL, AL) Yes No Invoice Shown separately on BASYes Workers Compensation Yes Tax Invoice from CCI Record in cash book "GST Receivable"Yes Stipend Payments (Religious/Order). Yes Tax Invoice from Religious Congregation 1/11th of cost of supply
PREMISES AND EQUIPMENT COSTS
Property Outgoings - Parish & PresbyteryYes Repairs & Maintenance Yes Tax Invoice from Supplier Record in cash book "GST Receivable"Yes Cleaning Yes Tax Invoice from Supplier 1/11th of cost of supply and serviceYes Electricity Yes Tax Invoice from SupplierYes Rates & Taxes & Levy Yes Shown as Acquisitions with no GST in price
on the BASProperty Outgoings - Commercial Premises
Yes Repairs & Maintenance Yes Tax Invoice from Supplier Record in cash book "GST Receivable"1/11th of cost of supply and service
Property Outgoings - Residential Premises(the rent charged is at market rates)
Yes Repairs & Maintenance Yes GST is not claimed back from ATO Shown as Acquistions for making GSTYes Electricity Yes Record as cost to Parish Input tax supplies on the BAS
Insurance premium Yes
Property Outgoings - Residential Premises(the rent charged is at less than 75% of themarket rent or less than 75% of the cost ofproviding the accommodation)
Yes Repairs & Maintenance Yes Tax Invoice from Supplies Record in cash book "GST Receivable"Yes Electricity Yes Tax Invoice from Supplies 1/11th of cost of supply and service
Insurance Yes Tax Invoice from CCI
Yes Property Outgoings - Presbytery House Yes Tax Invoice from Supplier Record in cash book "GST Receivable"1/11th of cost of supply and service
Yes Rent paid for premises (non residential) Yes Tax Invoice from Supplier Record in cash book "GST Receivable"1/11th of cost of supply used by Parish
Equipment Purchases - by Parish > $300Yes Furniture & Fittings Yes Tax Invoice from Supplier Record in cash book "GST Receivable"Yes Office & Computer Equipment Yes 1/11th of cost of supply used by Parish
Yes Equipment Purchases - by Parish<$300 Yes Tax Invoice from Supplier Record in cash book "GST Receivable"1/11th of cost of supply used by Parish
Insurance PremiumYes Premises - Parish, Presbytery, Yes Tax Invoice from CCI Record in cash book "GST Receivable"
Commercial Record as cost to Parish
11.5 Transaction Analysis
Parish Expenditure
Parish Expenditure
1 1 . S p e c i f i c R e q u i r e m e n t s f o r t h e C h u r c h
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Types of Activity-GST Impact
BAS Capital Expenditure TaxableInput Taxed GST Free
Documentation and Status of Transaction Notes
Yes Motor Vehicle Purchased Yes Tax Invoice from Supplier GST not claimed until 2001 50%,2002 100% of GST
Yes Major Renovations to Building Yes Tax Invoice from Supplier Record in cash book "GST Receivable"1/11th of cost of supply and service
No Loan Repayments - Principal Yes Not Subject to GST
Yes Property Purchases Yes Tax Invoice from Supplier Record in cash book "GST Receivable"(other than not new residential)) 1/11th of cost of supply and service
Please note that in the BAS Capital purchases of assets are shown as Captial acquisitions
Types of Activity-GST Impact
BAS Expenditure TaxableInput Taxed
Not GST Related
Documentation and Status of Transaction Notes
OTHER OPERATING COSTSYes Functions/Fund Raising by Parish
Hire of hall Yes Tax Invoice from Supplier Record in cash book "GST Receivable" Food Supplies (Not Fresh Food) Yes Tax Invoice from Supplier 1/11th of cost of supply and service
Yes Advertising paid in Catholic Newspapers Yes Tax Invoice from Supplier Record in cash book "GST Receivable" 1/11th of cost of supply and service
Yes Bank Charges Yes None Shown as Acquisitions with no GST in priceon the BAS
Yes Interest Expenses on Loans & Cheque A/cs Yes None Shown as Acquisitions with no GST in price on the BAS
Yes Travelling Expenses Petrol, Registration of MV Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
Air Travel & Accommodation Yes Tax Invoice from Supplier 1/11th of cost of supply and service
Yes Equipment Maintenance Photocopy Charges Yes Tax Invoice from Supplier Record in cash book "GST Receivable" Motor Vehicle Repairs Yes Tax Invoice from Supplier 1/11th of cost of supply and service
Yes Subscriptions Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
1/11th of cost of supply and service
Yes Lease Payments for Equipment Yes Tax Invoice from Supplier Record in cash book "GST Receivable" 1/11th of cost of supply and service
Yes Parish Sundry Goods Yes Tax Invoice from Supplier Record in cash book "GST Receivable"
1/11th of cost of supply and service
Yes Accounting Fees Yes Tax Invoice from Supplier Record in cash book "GST Receivable" 1/11th of cost of supply and service
Yes Entertainment Expenses Yes Entertainment Expenses that are not a Non - income tax deductible acquisitionsdeduction for Income Tax Purposes Cannot clain input tax back from ATO
Private Expenditure Cost to Parish
Parish Expenditure
Parish Expenditure
11.5 Transaction Analysis
1 1 . S p e c i f i c R e q u i r e m e n t s f o r t h e C h u r c h
35G S T G u i d e f o r t h e C a t h o l i c C h u r c h - A u s t r a l i a
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BAS Income - GST-free Supplies TaxableInput Taxed GST-free
Documentation and Status of Transaction Notes
No SECOND COLLECTIONPlanned Giving DONATIONS - not a supply for Not shown in BASEnvelopes - Parish consideration
No SECOND COLLECTION DONATIONS - not a supply for Not shown in BAS
School Building Fund considerationCatholic Charities Fund Receipt includes - Name of Building Fund (DGR)
- DGR NumberNo LOOSE COLLECTION DONATIONS - not a supply for Not shown in BAS
considerationNo SHRINES/CANDLES CHURCH DONATIONS - not a supply for Not shown in BAS
considerationNo DONATIONS - GENERAL/SPECIFIC PURPOSES DONATIONS - not a supply for Not shown in BAS
consideration if in the nature of a giftNo DONATIONS - FROM NON PROFIT SUB ENITIES DONATIONS - not a supply for Not shown in BAS
consideration (See Parish Unit Section).No DIOCESAN COLLECTIONS DONATIONS - not a supply for Not shown in BAS
considerationNo BEQUESTS/LEGACIES DONATIONS - not a supply for Not shown in BAS
considerationYes RELIGIOUS CEREMONIES
Wedding Fee for Church and Priest Yes None The fee charged is for the conductFuneral Fee for Service by Priest Yes Tax Invoice issued to Funeral Co. of the religious service by the priest and doesBaptisms, Communion, Confirmations Yes None not include the supply of goods.
No DIOCESAN SUBSIDY DONATIONS - not a supply for The purpose of the subsidy is for consideration general purposes and is unconditional
Yes RENTAL INCOME - RESIDENTIALRent received from Individuals Yes None No GST is charged on the rent received(the rent is charged at less than 75% of the marketrent or less than 75% of the cost of providing theaccommodation)
Yes RAFFLES AND BINGOS Yes Licence Held to conduct raffle GST-free if is does not contravene State GamingYes PIETY STALL Laws. Otherwise taxable.
Goods donated second hand Yes Where goods retain their original character.Goods Purchased and sold Yes GST-free where sold less than 75% of cost or 50% of market price. Otherwise taxable.
Yes Sale of Newsletters , magazines and journals Yes Not Commerical sales
BAS CLASSIFICATION
BAS Income - Taxable Supplies TaxableInput Taxed GST Free
Documentation and Status of Transaction Notes
Yes RENTAL INCOME - COMMERCIALRent Received from Business Yes Tax Invoice must be issued Record in cash books "GST Payable"Rent Received from School Yes Tax Invoice must be issued 1/11th of receipts
Yes COMMISSIONS & FEESCatholic Church Insurance Yes Tax Invoice must be supplied Record in cash books "GST Payable"Other Organisation Yes Tax Invoice must be supplied 1/11th of receipts
Yes * SALE OF BOOKS & ARTICLES Yes 1/11th of receipts GST payable Record in cash books "GST Payable"1/11th of receipts
Yes ADVERTISING IN PARISH BULLETIN Yes Tax Invoice Issued Record in cash books "GST Payable" 1/11th of receipts
Yes FUNDRAISING CONDUCTED BY THE PARISH* Dinner/dance in Parish Hall Yes 1/11th of receipts GST payable NOTE - Raffles and other froms of gambling* Raffles conducted by the parish Yes 1/11th of receipts GST payable will be taxable if it contravenes state law.
Sponsorships Yes 1/11th of receipts GST payable GST = 1/11th of (total collected less cash prizes)* Piety Stall/Auctions (New goods sold) Yes 1/11th of receipts GST payable
Yes GOODS SUPPLIED BY PARISH 1/11th of receipts GST payable Record in cash books "GST Payable"Flowers supplied and charged to service Yes Tax Invoice Issued 1/11th of receiptsCemetry plots sold to parishioners Yes Tax Invoice Issued
Yes CAPITAL RECEIPTS Tax Invoice must be issuedCapital grants Yes 1/11th of receipts GST payable Record in cash books "GST Payable"Sale of Assets (Motor Vehicles) Yes 1/11th of receipts GST payable 1/11th of receiptsSale of Property (Land & Building) - excludes Yes 1/11th of receipts GST payablethe sale of residential property owned by parish Tax Invoice must be issued
* If these activities are carried out by a Non- Profit Sub Entity, then the Income raised is not subject to GST and is donated to the Parish
BAS CLASSIFICATION
BAS Income - Input Taxed Supplies TaxableInput Taxed GST Free
Documentation and Status of Transaction Notes
Yes RENTAL INCOME - RESIDENTIALRent Received from Individuals Yes None No GST is charged on rent received (the rent charged is at market rates)
Yes INTERESTFrom Catholic Development Fund Yes None Inculded in BASFrom External Banks Yes None
Yes CANTEEN/TUCKSHOPS Yes None No GST Payable to ATO
Parish Income
Parish Income
Parish Income
Types of Activity-GST Impact
Income NON - PROFIT SUB - ENTITIES TaxableInput Taxed GST Free
Documentation and Status of Transaction Notes
NOTE:Where certain activities of a parish are independent then they can choose not to fall under the Registration of the Parishfor GST Purposes and will be regarded as "NPSE"(1) The unit turnover is less than $100,000.(2) The unit operates under a separate committee from the parish and is referred to as a separate entity(3) The unit maintains independent accounting records to identify the NPSE transactions.ASSUME THAT NON-PROFIT SUB-ENTITIES ARE NOT REGISTERED FOR GST PURPOSES
PIETY STALLGoods Sold at Trading Tables X Surplus from Trading can be
donated to the parish GST-freeFUNDRAISING/DINNERSDinner /dance functions X No GST can be claimed back Surplus from Trading can be on goods & services supplied at donated to the parish GST-freeSocial Functions these functions
GOODS SOLD BY THE PARISH (Now a NPSE).Religious Goods sold (New) X No GST can be claimed back on Surplus from sales donated to
goods purchased Parish
REGISTRATION REQUIREMENTS:
The parish (the eligible entity) should formalise thecreation of NPSE by formal letter outlining the activities that willconstitute the NPSE.Where the NPSE has a turnover less than $100,000 it will not be required to register for GST purposes thus,the revenue raised will not be a taxable supply for GST purposes and GST on inputs will not be allowed.
The NPSE should keep independent accounting records from the Parish (the core entity).
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Non-Profit Sub-Entities
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A key part of the New Tax System is a
broad-based Goods and Services Tax (GST)
applying to most goods and services. As
part of the broad base of the tax, religious
organisations will become part of the tax
system (some for the first time), but many
activities will be GST-free.
The current entity-based exemption system
from wholesale sales tax for charitable
and religious organisations cannot be
transferred to the activity-based GST.
(For wholesale sales tax, many religious
entities were exempt. Under the GST
system, there are no exempt entities.
Transactions of entities may or may not be
GST-free according to their nature.)
According to the Tax Office, the availability
of input tax credits for GST paid on goods
and services purchased by religious
organisations will maintain an effective
tax-free status for the sector.
To participate in The New Tax System entities
need to register by the 31st May 2000.
12.1 Registration for an ABN
Most entities within the Church will benefit
from registering for an ABN. The reasons
for obtaining an ABN are discussed in
Chapter 13 of this manual.
You can register for the New Tax System
by filling out an application form and
sending it to the ATO. Some Church groups
will have received a pre-printed
registration form from the ATO. If not, or if
you require more forms, you can obtain a
registration package by phoning the
business Tax Reform Infoline on 13 24 78
or by collecting one at a Post Office, or
newsagent, or bank.
As an alternative, the ATO has made
available an Excel spreadsheet for Catholic
bodies such as religious congregations and
parishes/dioceses who may wish to register
multiple entities. This will assist lodgment
for Church bodies seeking registration for
themselves and for a number of their other
units.
Other ways to register are:
▲ Electronically through the Business
Entry Point at www.business.gov.au; or
▲ Your tax agent can also lodge your
application through the Electronic
Lodgment System.
Further details are provided in Chapter 13.
12.2 Registration for GST
Non-profit organisations including
religious organisations must register for
GST if they have an annual turnover of
$100,000 or more. Donations and interest
are not included in the calculation of
turnover for registration purposes.
Organisations with a turnover of less than
$100,000 may choose whether or not to
register for GST.
The operation of the GST is explained in
Chapters 4 and 6 of this manual. For those
entities which may choose whether or not
to register for GST (that is, entities with a
turnover of less than $100,000), further
information is provided in Chapter 14.
Some options about the form of
registration are discussed in Chapter 15.
1 2 . R e g i s t r a t i o n & E n d o r s e m e n t
12. Registration & Endorsement
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12.3 Endorsement as an Income
Tax Exempt Charity (ITEC)
An Income Tax Exempt Charity is a charity
that has been endorsed by the ATO as
exempt from income tax. Most church
entities are charities (see Chapter 9.2).
Charities are not automatically exempt
from income tax. From 1 July 2000 there
is a new system of endorsement which
means charities must apply to the ATO for
exemption. If the ATO gives you notice
that you are endorsed as exempt from
income tax, you do not need to lodge
income tax returns unless specifically
requested to do so.
To be endorsed as an Income Tax Exempt
Charity (ITEC) you must:
▲ Have an Australian Business Number
(ABN);
▲ Be entitled to endorsement;
▲ Apply to the ATO for endorsement.
The requirements for endorsement are
different for charitable institutions and
charitable funds. Some charitable funds
that were not established in Australia
cannot be endorsed. They are:
▲ Charitable funds established by a will
from 1 July 1997; and
▲ Charitable funds established by an
instrument of trust.
All other charities must be endorsed to be
exempt from income tax. They are:
▲ Charitable institutions;
▲ Charitable funds established by a will
before 1 July 1997;
▲ Charitable funds established in Australia
by a will on or after 1 July 1997; and
▲ Charitable funds established in Australia
by an instrument of trust.
The requirement for endorsement applies
even if the institution or fund also falls in
some other category of income tax exempt
entity. Other categories include religious
institutions, scientific institutions and
public educational institutions.
To be endorsed, entities must first register
for The New Tax System and receive an
ABN. On the ABN registration form answer
‘Yes’ to questions 9, 10 and 12. The ATO
will then send to you the relevant
application form.
The ATO is also to make available an Excel
spreadsheet to facilitate bulk endorsement
of multiple ITEC entities. Parishes should
consult their Diocesan, or Congregational
Business Managers for details. Congregations
may wish to consult with ACLRI.
Refer to Chapter 16 for further details
regarding ITEC endorsement.
12.4 Endorsement as a Deductible
Gift Recipient (DGR)
A Deductible Gift Recipient (DGR) is an
entity that is entitled to receive income tax
deductible gifts. All DGRs have to obtain
endorsement, unless they are named
specifically in the income tax law.
To be endorsed, entities must first register
for The New Tax System and receive an
ABN. On the ABN registration form answer
‘Yes’ to questions 9 to 12. The ATO will
then send to you the relevant application
form. Separate applications will be
required for each status (DGR and ITEC).
Chapter 17 provides more explanation
about what is entailed in obtaining
endorsement for Gift Deductibility.
Registration Deadline You must register by 31 May 2000 to be
part of The New Tax System when it
commences on 1 July 2000.
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Single identifier for all entities
When you register you will receive an
Australian Business Number (ABN). This
is a new identifier which you will use for
your dealings with the ATO and for
future dealings with other government
departments and agencies at all levels.
Why Should we Register for The
New Tax System?If you register for The New Tax System and
receive an ABN:
▲ You will be able to apply to the ATO for
endorsement as a Deductible Gift
Recipient and/or as an Income Tax
Exempt Charity;
▲ You will be able to register for GST and
therefore able to claim input tax credits
for GST paid on goods and services
which you acquire;
▲ You will be able to register as a group
employer (if you have employees); and
▲ You will receive full payment from other
registered entities. (Organisations and
individuals who have registered for GST
will be required to withhold 48.5 cents
in every dollar from payments which
they make to you for goods and services
you supply to them, if you are not
registered.)
Who is Entitled to Register for an ABN?To be entitled to an ABN you must be:
▲ A company registered under the
Corporations Law;
▲ A government department or agency;
▲ An entity carrying on an enterprise in
Australia; or
▲ A non-profit sub-entity.
An entity for ABN purposes means an
individual, a body corporate, a corporation
sole, a body politic, a partnership, an
unincorporated association or body of
persons, a trust or a superannuation fund.
Branches of charities and other not-for-
profit organisations may choose to register
as a non-profit sub-entity, as explained in
Chapter 15. This flexibility may be
particularly useful to many Church
entities.
You can register for an ABN, GST, FBT,
PAYG and other elements of The New Tax
System at the same time.
Your Church entity should register for at
least one ABN regardless of the number of
enterprises that you undertake. However,
if your enterprises are carried on by a
number of different entity types, each
entity must register in its own right.
If your organisation is a subsidiary of a
governing body, it is advisable that you
discuss ABN registration with your
governing body.
How to Register
By filling out an application form.
There are two versions of the application
form. The generic version (available from
the ATO, post offices and newsagents) has
49 questions and has no pre-determined
answers. The pre-printed version is
provided by the ATO to organisations with
which it has had previous dealings or on
request from an organisation. It has 41
questions with answers to some of these
pre-completed for verification by the user.
Both versions include a compulsory
Attachment A.
To assist Church entities to correctly and
consistently complete the application form,
the guide “Sample Answers to the ABN
Registration Form” has been compiled and
can be obtained from your Congregational
or Diocesan Business Manager or ACLRI.
Using the Excel spreadsheet.
Contact your Diocesan or Congregational
Business Manager or ACLRI.
1 3 . A u s t r a l i a n B u s i n e s s N u m b e r ( A B N ) R e g i s t r a t i o n
13. Australian Business Number (ABN) Registration
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1 3 . A u s t r a l i a n B u s i n e s s N u m b e r ( A B N ) R e g i s t r a t i o n
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13Electronically at www.business.gov.au
Registrations can be lodged electronically
by going to the above web-site and filling
in the electronic form. The “Sample
Answers” guide can still be used to
register in this format, however some of
the concessions available to Catholic
organisations will not be accepted by the
electronic form, especially at question 18
(contact person) and in Attachment A.
Lodgment by Tax Agent
If you have a tax agent then your agent
can lodge your registration form through
the Electronic Lodgment System. However
some of the concessions available to
Catholic organisations may again not
be accepted.
14.1 Based on Turnover
The registration turnover threshold is
$100,000 (for church and charitable
organisations).
This means that if your turnover
(excluding donations and interest) is
greater than $100,000 per annum you
must register for GST.
If your turnover is less than $100,000 you
can choose to register. You might do this if:
▲ You believe that your turnover may
reach $100,000 within the next twelve
months; or
▲ You wish to claim input tax credits (a
refund) for GST which you have paid on
goods and services which you have
acquired; and
▲ The cost of complying with GST
reporting requirements does not exceed
the amount of input tax credits which
you expect you will be able to claim.
What is turnover?
Whether or not you prepare annual
accounts, you could regard your turnover
as being the total amount of income
received during the year. However some
amounts are specifically excluded from
turnover.
Turnover includes:
▲ All taxable supplies
▲ All GST-free supplies
Turnover excludes:
▲ General donations (no supply)
▲ Pensions
▲ Patrimony
▲ Sale or transfer of capital assets
▲ Input taxed supplies – investment
receipts, repayment of borrowings.
Registration Turnover Threshold
To determine whether the Registration
Turnover Threshold has been met, regard
must be had to both the current annual
turnover and the projected annual
turnover:
▲ Current annual turnover = Current
month + previous 11 months
▲ Projected annual turnovers = current
month and next 11 months
If the Registration Turnover Threshold
is reached, the entity must register within
21 days.
Entities with an ABN but not registered for
GST should have regard to their GST
status whenever contemplating a large
transaction (for example, a government
grant). Such a transaction when it occurs
can cause the entity to exceed the
registration turnover threshold.
14.2 Why Register for GST?
The main advantage of registering for GST
is that you will be able to claim a refund
(input tax credits) of GST paid on goods
and services which you buy. The main
disadvantage is the risks in not complying
with the new laws and therefore the cost of
compliance.
Each Church body which is under the
registration turnover threshold ($100,000)
may wish to consider the types and
volumes of acquisitions (purchases) of
goods and services which it makes and try
to estimate the financial impact of not
being able to claim back amounts of GST
paid out. Entities may be able to utilise the
flexible registration provisions discussed
in Chapter 15 to register some of their
enterprises but not others.
If doubt exists as to whether or not to
register for GST it is advisable to obtain
professional advice.
1 4 . G S T R e g i s t r a t i o n
14. GST Registration
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14.3 Registration Implications
14.3.1 Charge GSTEntities including church entities that are
registered for GST will generally charge
10% GST when they supply any goods,
services or anything else as part of their
enterprise, unless the supply qualifies as a
GST-free or input taxed supply. The
definition of a supply is wide ranging (see
Chapter 5). A supply of services includes
for example the ministry of an individual
religious in consideration of which a
stipend is paid.
Entities, which charge GST, are required to
remit the GST collected to the ATO (but
offset by input tax credits as described
below).
14.3.2 Claim input tax credits You will also pay GST on the things you
acquire for your enterprise. Registered
entities can claim a refund of the GST they
have paid. This is called an input tax
credit. Input tax credits can only be
claimed where the acquisition (purchase)
was of a taxable supply for a creditable
purpose. The amount of GST included in a
price paid can be determined by dividing
the price by eleven.
14.3.3 Reporting to the ATOThe difference between the GST you have
collected and the GST you have been
charged is the amount you owe to or are
owed by the ATO. You pay this amount or
claim a refund when you submit a BAS
(see Chapter 20).
If you are registered for GST you must
submit a BAS within 21 days of the end of
each tax period (see Chapter 20). You must
keep records supporting your BAS for five
years.
There are penalties for not complying with
the provisions of the GST legislation
so registered entities will be wise to
adopt a compliance and risk management
program.
14.3.4 Cash Flow ImplicationsWhether registering for the GST will create
a positive or negative cash flow effect will
depend on whether the entity is a net
remitter of GST to the ATO or a net
claimant of input tax credits.
Whatever the case, the introduction of the
GST is likely to distort your current pattern
of cash flows. Church entities may wish to
examine the cash flow effect of the GST
and plan accordingly.
14.3.5 Other ImplicationsEntities who register for GST will have to
prepare for the GST. The specific
preparation requirements are detailed in
Chapter 11.
14.4 Non-Registration
Implications
14.4.1 Cannot claim input tax creditsChurch entities which are not required to
be registered (that is, have a turnover of
less than $100,000) and which then
choose not to register will be unable to
claim input tax credits for GST which they
pay on their acquisitions of goods and
services.
As GST will apply to most purchases that
an entity makes including for example,
motor vehicles, building maintenance and
general insurance, the amounts of GST
paid by an entity can quickly become large.
Entities considering not registering for GST
should carefully consider the potential
economic impact of the decision.
14.4.2 Cannot claim a credit for
Wholesale Sales Tax The Wholesale Sales Tax system ends on
30 June 2000. Entities, which on that date
hold trading stock upon which they have
paid wholesale sales tax, are entitled to
claim a refund of the wholesale sales tax
previously paid. This provision may be of
interest to church entities that conduct
retail activities such as bookshops or
gift shops.
14.4.3 Reporting to the ATOEntities that do not register for GST may
have other tax obligations and
entitlements such as FBT and PAYG
withholding for group tax deducted from
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employees wages or withholdings from
amounts paid to unregistered suppliers.
These amounts are reported to the ATO
each reporting period on an Instalment
Activity Statement (IAS).
The reporting period depends on the
amount of PAYG tax instalments payable:
▲ Quarterly for annual amounts to
$25,000;
▲ Monthly for annual amounts between
$25,001 and $l million; and
▲ Weekly for annual amounts greater than
$1 million.
The IAS is required to be lodged with the
ATO on the 21st day of the month
following the end of the reporting period.
The main advantage of not registering for
the GST is the reduction or elimination of
the costs of compliance. This advantage
will frequently be outweighed by the
economic disadvantage discussed in
14.4.1 and 14.4.2.
14.4.4 Constant Monitoring
of TurnoverIf an entity is required to be registered
(turnover exceeds the $100,000 threshold)
but is not registered it can suffer material
loss (see Chapter 14). Entities not
registered for GST must monitor their
current and projected turnovers and
register within 21 days of becoming
required to be registered.
14.5 Registering for GST?
You register or not register for GST when
you complete your application form for an
ABN.
On the “Application to Register for the New
Tax System – Companies and Other
Organisations” form GST registration is
dealt with at questions 37 and 38 if you
are using the generic form or questions 30
and 31 if you are using the pre-printed
form (refer to Chapter 13).
Failure to Register for GST when
Required
If an entity which is required to register for
GST (because its turnover exceeds
$100,000 per annum) fails to register then:
▲ It may be subject to penalties;
▲ It will be ineligible to claim input tax
credits on its creditable acquisitions;
▲ It will be liable to the ATO for one
eleventh of its receipts in respect of
taxable supplies it has made; and
▲ It may have problems recovering this
GST liability from its clients.
Therefore, it is important that an entity
monitors its turnover on a monthly basis
to ensure GST registration is obtained
within 21 days of turnover exceeding the
threshold.
14.6 Cancelling your GST
Registration
You must apply to cancel your GST
registration with the ATO within 21 days of
ceasing to carry on an enterprise. If you
have more than one enterprise, you only
have to cancel your registration if you
cease to carry on all your enterprises. You
can also apply to cancel your GST
registration if your annual turnover drops
below $100,000 (for non-profit
organisations).
If your GST registration is cancelled, the
ATO will notify you in writing of the date
of effect of your cancellation.
If you don't apply to cancel your
registration when required, the ATO can
cancel your registration and backdate the
cancellation. Any supplies and
acquisitions you made between the date of
effect of the cancellation and the date of
the decision are outside the GST system.
This means GST is not payable on supplies
and you cannot claim input tax credits.
You may be penalised for failing to apply to
cancel your GST registration if you are no
longer carrying on an enterprise.
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N o t e s
Notes
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15.1 Individual
Each entity should register to obtain an ABN.
‘Entity’ is defined by the ATO as meaning
any of the following:
▲ An individual;
▲ A body-corporate;
▲ A corporation sole;
▲ A body politic;
▲ A partnership;
▲ Any other unincorporated association or
body of persons;
▲ A trust;
▲ A superannuation fund.
15.2 Grouping
Grouping is when a number of bodies
decide that accounting for GST will be
undertaken by one of the group rather than
each accounting separately. To do so each
member of the group must:
▲ Have an ABN;
▲ Be registered for GST;
▲ Be members of the same non-profit
association;
▲ Have the same accounting period (see
Chapter 20);
▲ Have the same method of accounting
(see Chapter 19); and
▲ Not be a member of any other GST group.
Grouping means:
▲ One member is responsible for keeping
records and attending to GST
transactions.
▲ GST does not apply on inter-entity
transactions.
To apply for approval as a GST group each
entity must first obtain an ABN and
register for GST. The entity that will
represent the group for GST accounting
purposes will then contact the ATO to
obtain an application form. The
application form is then completed and
submitted to the ATO who will then
approve the group of entities as a GST
Group.
15.3 Branches
Branching is when sections of the entity
become separate divisions for GST
purposes. It is permitted where the
branches:
▲ Already, or intend to, carry on an
enterprise from the branch;
▲ Maintain an independent system of
accounting;
▲ Can be separately identified by either
▲▲ the nature of the activities; or
▲▲ the location; and
▲ The entity (main body) is not a member
of a GST group.
You do not have to register all of your
branches separately as GST branches. You
can choose to register one branch, some or
none.
To work out if an entity should register its
branches, the registration turnover
threshold applies to the entity as a whole,
not to each branch separately.
15.4 Non-profit Sub-Entities
(NPSE)
Charities and most not-for-profit
organisations that are income tax exempt
have flexible GST registration options.
Church entities will need to consider these
options prior to registering.
In most cases, it will be wise to obtain
professional advice in this regard by
consulting with your local accounting or
legal advisors about your registration
options.
Charitable institutions (that are registered
for GST) can separately identify activities
or units from the core entity for GST
purposes so that income generated from
these activities are not subject to GST.
These units are known as non-profit sub-
entities, (NPSE).
1 5 . Fo r m o f R e g i s t r a t i o n
15. Form of Registration
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The registered entity can elect to treat
identifiable activities as a separate unit for
GST purposes known as NPSE. To qualify
for NPSE the following criteria must be met:
(1) The registered entity is a charitable
institution (Schools, Parishes and
Congregations);
(2) The turnover of the NPSE is below
$100,000;
(3) The NPSE maintains an independent
system of accounting, which allows all
of its transactions to be identified; and
(4) The NPSE can be separately identifiable
either through its activities or its
location, and can be referred to in the
“core” entity’s records as a separate unit.
From a practicable point of view the
following should be considered:
(1) The NPSE does not obtain an ABN
unless its turnover exceeds $100,000
for GST purposes. Where this happens
you should consider to break down the
NPSE further if you can meet the above
criteria or bring back the accounting for
the transactions into the “core entity”.
(2) Whilst the legislation does not detail
how to create a NPSE it is recommended
that the “core entity” being a school or
parish for example formalise the
creation of the NPSE by formal letter
outlining the activities that will
constitute the NPSE that is controlled by
a separate committee. (Example:
fundraising committee, fete committee).
Copies of this letter are to be kept by the
“core entity” and sub-entity;
(3) There is no limit to the number of NPSE
used by a charitable institution;
(4) The transactions relating to the NPSE
are not subject to GST. Revenue raised
is free from GST, therefore no input tax
credit can be claimed for the GST paid
on the purchase of goods and services
used in the activities conducted by
the NPSE;
(5) The transactions relating to the NPSE
must be identified separately for
accounting purposes with either
separate general ledger accounts in a
computer system or columns in a
cashbook. Separate bank accounts
are recommended and should be
used. However, if a separate bank
account is not possible or practical,
please ensure that your accounting
records reflect a clear and visible
distinction between the “core entity”
and the sub-entity i.e. they are
separate. The ATO, through the
Charities Consultative Committee will
be issuing a ruling on ‘separate
accounting’ in the near future;
(6) If for some reason, it is decided that the
sub-entity ceases to exist, it is again
recommended that the “core entity”
being a school or parish for example
formalise this abandonment of the
NPSE by formal letter. Copies of this
letter are to be kept on file as a record.
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An Income Tax Exempt Charity (ITEC) is a
charity that has been endorsed by the ATO
as exempt from income tax.
Charities are not automatically exempt
from income tax. From 1 July 2000 there is
a new system of endorsement which means
charities must apply to the ATO for
exemption. If the ATO gives you notice that
you are endorsed as exempt from income
tax, you do not need to lodge income tax
returns, unless specifically requested to do so.
Why introduce endorsement?The approval process will limit concessions
so that they are only available to endorsed
charities. Only endorsed charities will
maintain funding levels from trust
distributions or be able to be income tax
exempt.
Charities will also benefit from increased
community confidence in the charitable
sector.
Who can be endorsed?Australian organisations are entitled to
endorsement if they are regarded as
charities and satisfy certain specific
conditions.
Is endorsement compulsory?From 1 July 2000, endorsement is
compulsory for a charity to become or
continue to be income tax exempt.
Do currently exempt charities need
endorsement?Charities that currently have income
tax exempt status need to be endorsed
from 1 July 2000. Endorsement replaces
current self-assessment and confirmation
arrangements for income tax exemption.
These arrangements cease to operate from
1 July 2000.
Do you need an Australian Business
Number (ABN)?A charity seeking endorsement must first
obtain an ABN.
You should lodge an application for an
ABN as soon as possible.
Do you need to register for GST?You do not need to register for GST to apply
for (or obtain) ITEC endorsement
Does endorsement entitle you to
receive tax deductible gifts?ITEC endorsement does not entitle you to
receive tax deductible gifts. There is a
separate endorsement to Deductible Gift
Recipients (DGR). For further information
refer to Chapter 17
How do you apply for endorsement?To apply for endorsement as an ITEC you
must lodge the form “Application for
Endorsement as an Income Tax Exempt
Charity” with the ATO.
This application is made after you receive
you ABN. When registering for an ABN,
answer Yes to question 10. The ATO will
forward the ITEC application form to you
when they send your ABN.
The Australian Catholic Church Tax
Working Group will provide assistance in
the completion of ITEC endorsement
applications. An Excel Spreadsheet is to be
made available by the ATO for bulk
lodgement in some circumstances. Contact
your Diocesan or Congregational Business
Manager or ACLRI.
NotificationOnce the ATO has processed your
application, it will send you written
confirmation that:
▲ You are endorsed as exempt from income
tax; or
▲ Endorsement has been refused.
If you are endorsed you are exempt from
income tax from the date the endorsement
starts.
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Entitlements & ObligationsBeing endorsed as an income tax exempt
charity (ITEC) gives you important income
tax entitlements. An ITEC:
▲ Does not pay income tax; and
▲ Does not have to lodge income tax
returns unless specifically requested to do
so.
However, there is an important obligation.
If an ITEC ceases to be entitled to
endorsement, it must tell the ATO in writing.
ATO reviewAs part of its general administration of
taxation laws, the ATO will carry out
reviews of ITECs. The reviews will help
establish if ITECs are in fact entitled to
endorsement.
The ATO may request that you provide
information and documents that are
relevant to your entitlement to
endorsement. While you must comply with
this request, you will be given at least 28
days to provide the required information
and documents. Failure to comply can lead
to endorsement being revoked, and to
prosecution.
The ATO “Charity Pack” contains full
details about ITEC Endorsement.
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Deductible Gift Recipients (DGRs) are
entities to which donors can make income
tax deductible gifts.
Under the existing tax system charities
have been able to self-assess their gift
deductibility or obtain confirmation from
the ATO. This system will cease on 30 June
2000 and a new system of endorsement of
an organisation as a deductible gift
recipient will commence.
From 1 July 2000 DGRs will:
▲ Be listed by name in the income tax
legislation; or
▲ Have received a notice from the ATO
stating they have been endorsed as
DGRs.
From this date a charity which is not
endorsed will lose any current gift
deductibility.
What is endorsement about?Endorsement is the new approval process
for organisations applying to the ATO for
DGR status
Why introduce endorsement?The Government wants to ensure that only
those organisations that the law intended
to have DGR status receive that status.
Who is entitled to endorsement?Organisations are entitled to endorsement
if they qualify under one or more of the
categories set out in the gift provisions of
the income tax law.
Is endorsement compulsory?From 1 July 2000, endorsement will be
compulsory for an organisation that
wishes to obtain (or continue to hold) DGR
status.
Do current DGRs need endorsement?Generally, organisations that have current
DGR status need to be endorsed from
1 July 2000. Endorsement replaces current
DGR confirmation arrangements. These
arrangements cease to operate from 1 July
2000.
Do all DGRs have to apply?No. Organisations specifically mentioned
by name in the income tax law do not have
to apply for endorsement.
Do you need an Australian Business
Number (ABN)?An organisation seeking endorsement must
first obtain an ABN. You should lodge your
application for an ABN as soon as possible.
Do you need to register for GST?You do not need to register for GST to apply
for (or to obtain) DGR status.
Does DGR endorsement cover income
tax exempt charity status?No. Endorsement as an income tax
exempt charity is a separate process.
Organisations that consider themselves to
be a charity as well as a DGR should
indicate this on their ABN application.
What are the pre-requisites for
endorsement?▲ The applicant must have an Australian
Business Number (ABN);
▲ The applicant must maintain a gift fund;
▲ The organisation (or relevant part of the
organisation) must:
▲▲ generally be in Australia
▲▲ come within a gift category set out
in the income tax law, and
▲▲ satisfy any special conditions in the
tax law.
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17. Deductible Gift Recipient (DGR) Endorsement
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What is a gift fund?A gift fund is a special fund that the
applicant must maintain to receive all gifts
made for the principle purpose of the
applicant organisation (or for the principal
purpose of the relevant part of the
organisation).
The gifts can only be used for the
principal purpose of the applicant (or for
the relevant part of the applicant
organisation).
For further information see the fact sheet
“Gift fund requirements for deductible gift
recipients (DGRs)” available from the ATO.
What does in Australia mean?To be in Australia, the applicant (or relevant
part of the applicant’s organisation) must:
▲ Be established in and operating in
Australia; and
▲ Have its beneficiaries and purposes in
Australia.
Overseas aid funds and public funds on the
register of environmental organisations
need not meet this criteria.
Can sub-entities be endorsed?Certain not-for-profit organisations can
choose to treat separately identifiable
sections of their organisations (non-profit
sub-entities) as though they are entities for
GST purposes. Sub-entities can have their
own ABN.
However, a non-profit sub-entity cannot
be endorsed as a DGR in its own right.
The parent organisation must apply for
endorsement on behalf of the non-profit
sub-entity.
Which ABN should be used on the
application?The organisation making the application
must quote its ABN. This applies even
where an applicant is seeking endorsement
for a particular fund, authority or
institution that it operates, and this part of
the organisation has an ABN that is issued
to it on the basis that it is a non-profit sub-
entity.
For example, if a church applies for
endorsement of a sub-entity welfare
institution that it operates, it must use its
own ABN, even if the institution has a
separate ABN for GST purposes.
How do you apply for endorsement?
To apply for endorsement as a DGR
you must lodge the form “Application
for Endorsement as a Deductible Gift
Recipient” with the ATO.
This application is made after you receive
your ABN. When registering for an ABN
answer Yes to question 11. The ATO will
forward the DGR application form to you
when they send your ABN.
Can endorsement be streamlined?Where current DGR status has been
confirmed by the ATO, the endorsement
process is streamlined by an organisation
quoting its current 900/DGR number
on its application. If an organisation does
not know its 900/DGR number, the
organisation should make a written
request now to the ATO for the number.
In January 2000 ACBC and ACLRI
requested from members details of DGR
entities. Those were compiled and
submitted to the ATO. They are now being
processed and 900/DGR numbers should
be available to entities shortly.
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18.1 Registering Legal Entities
Register as soon as possible to receive an
ABN and for GST electronically or by
completing an application form.
18.2 Registering a Non-Profit
Sub-Entity
Register as soon as possible after you have
identified the sub-entities which you wish
to register. Register each sub-entity for the
GST or not, according to the particular
circumstances of each sub-entity.
If you have numerous entities to register,
you may wish to register the principal
entity and the sub-entities at the same time
using the Excel spreadsheet.
Note that it may not be necessary to
register some non-profit sub-entities for an
ABN (See Chapter 15)
18.3 Applying for ITEC & DGR
Endorsement
When the ATO sends you the ABN for your
entity they will also provide the required
application forms. Complete and submit
these as soon as possible. Note that this
may be done on an Excel spreadsheet.
Contact you Diocesan or Congregational
Business Manager.
18.4 Registering a Branch
After you have received the ABN for
the principal entity, contact the ATO to
request the application form for branch
registration.
18.5 Registering a Group
When each member of the group has
received its ABN, the representative
member contacts the ATO to request the
application form.
1 8 . R e g i s t r a t i o n S e q u e n c e
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N o t e s
Notes
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19.1 Cash v Accrual Accounting
An entity which has registered for GST
will report its tax entitlements and
obligations on a new single form called a
Business Activity Statement (BAS) (see
Chapter 20)
You will claim input tax credits and
account for GST payable on your Business
Activity Statement at the end of each tax
period (see Chapter 20).
There are some rules about how to work
out which tax period your GST amounts
belong to, that is, which tax periods they
are attributed to. The rules for attributing
GST payable and input tax credits to tax
periods are different, depending on
whether you account for GST on a cash
basis or accrual basis.
To determine what method of accounting
you currently use, look at your invoicing
procedures and when you record payments
and sales. If you issue or receive an invoice
but do not account for the sale or purchase
until the cash is received or paid, you are
using a cash basis. If you account for the
sale or purchase at the time you issue or
receive an invoice, you are using an
accrual basis.
Cash Accounting Turnover Threshold
The cash accounting turnover threshold is
$1million. Organisations with an annual
turnover exceeding $1million must
account for GST on an accrual (non-cash)
basis. Organisations with an annual
turnover less than $1million may choose
whether to account for GST on a cash or on
an accrual basis.
There are some exceptions to this rule,
including for charities.
Charities may choose
regardless of turnover
Any charitable institution, any trustee of a
charitable fund or any gift-deductible
entity may choose to account for GST on a
cash basis, whether or not its annual
turnover exceeds the cash accounting
turnover threshold. Most church entities
will be charitable institutions (see
Chapter 9).
Many of these entities currently will be
using cash accounting. They may wish to
consider whether the time of introduction
of new concepts and arrangements for
taxation is the best time to learn about the
intricacies of accrual accounting. They may
wish to account for GST on a cash basis
unless:
▲ They are currently using accrual
accounting; and/or
▲ There is a significant cash flow advantage
for the entity in accounting for GST on a
non-cash basis and the entity has the
administrative capacity to account in
this way.
Cash flow implications
If you are a net remitter of GST to the ATO
you may obtain a cash flow benefit by
accounting on an cash basis.
If you are a net claimant for input tax
credits you may obtain a cash flow benefit
by accounting on a accrual basis.
Professional advice
In most cases the simplest method will be
to account for GST on a cash basis.
However if you already prepare your
accounts by the accrual method you may
wish to continue on this basis.
If contemplating a change of accounting
method it is recommended that professional
advice be obtained.
1 9 . A c c o u n t i n g f o r G S T
19. Accounting for GST
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19.2 Cash Basis
Am I currently accounting
on a cash basis?
Cash accounting recognises income and
expense as receipts and payments, that is,
when money is received or paid out.
To determine what method of accounting
you currently use, look at your invoicing
procedures and when you record payments
and sales. If you issue or receive an
invoice but do not account for the sale or
purchase until the cash is received or paid,
you are using a cash basis.
Many church entities will currently be
using cash accounting.
If you use a cash basis of accounting you
account for the GST payable when you
receive payment for a taxable supply, and
claim input tax credits (refunds of GST you
have paid) when you actually pay for
acquisitions. In other words, you cannot
claim an input tax credit until you have
paid for the goods and services, and you do
not have to pay the ATO the GST included
in the price of a supply until you receive
payment for that supply.
Liability to remit GST
Liability to remit to the ATO the GST you
have collected arises only when the
payment is received.
Right to claim an input tax credit
The right to claim an input tax credit from
the ATO arises when a payment is made
and a tax invoice is held.
19.3 Accrual Basis
Am I currently accounting on an
accrual basis?
Accrual accounting recognises income as it
is earned and expenses as the goods or
services are used. Generally this does not
correspond with the timing of receipts and
payments.
To determine what method of accounting
you currently use, look at your invoicing
procedures and when you record payments
and sales. If you account for the sale or
purchase at the time you issue or receive
an invoice rather than when you make or
receive payment, you are using an accrual
(non cash) basis.
Generally larger entities use accrual
accounting, but this is not always so.
If you do not use a cash basis you will
account for all GST payable and all input
tax credits in the earlier of:
▲ The tax period in which a tax invoice is
issued relating to that supply; or
▲ The tax period in which any of the
consideration is received or made.
Liability to remit GST
Liability to remit to the ATO the GST you
have collected arises at the time of the
transaction (when the invoice is issued),
not when the payment is received.
Right to claim an input tax credit
The right to claim an input tax credit from
the ATO arises when you receive the goods
or services and a tax invoice is held.
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20.1 Tax Periods
An entity which has registered for GST will
report its tax entitlements and obligations
on a new single form called a Business
Activity Statement (BAS) (see Chapter
20.4).
You will claim input tax credits and
account for GST payable on your BAS at
the end of each tax period. Tax periods are
monthly or quarterly. You will need to
decide which tax period you wish to use
before you register for The New Tax System.
Tax periods are the reporting periods for GST
and can be monthly or quarterly. Quarterly
tax periods are periods of three months
ending on 30 September, 31 December, 31
March and 30 June. Monthly tax periods end
on the last day of each calendar month.
The tax period turnover threshold
Monthly tax periods are compulsory if your
annual turnover is $20 million or more.
If your annual turnover is less than $20
million, you generally have quarterly tax
periods. However you may choose to have
monthly tax periods. Church entities may
wish to consider this option if the cash flow
implications for the entity are significant.
If you are a net remitter of GST to the ATO
(ie. if the GST received on sales and
services is greater than the GST paid on
acquisitions) you may benefit by reporting
on a quarterly tax period basis.
If you are a net claimant of input tax
credits (ie. If the GST paid on acquisitions
is greater than the GST received on sales
and services), you may obtain a cash flow
benefit by reporting on a monthly tax
period basis.
Professional Advice
In most cases the simplest method will be
to account for GST on a quarterly basis.
However if you already prepare your
accounts on a monthly basis you may wish
to complete a business activity statement
for each accounting cycle.
If contemplating a change of accounting
method it is recommended that professional
advice be obtained.
20.2 Quarterly Reporting
General Rule
The general rule is that you have quarterly
tax periods unless:
▲ You exceed the tax period turnover
threshold ($20million per annum); or
▲ You choose to have monthly tax periods.
Period end dates
Quarterly tax periods are the three month
periods in any year ending on the
following dates:
▲ 31 March;
▲ 30 June;
▲ 30 September;
▲ 31 December.
Reporting dates
The due date for lodgment of your BAS is
the 21st day of the month following the
end of the quarter. In respect of the tax
periods in the previous section, BAS must
be lodged on or before:
▲ 21 April;
▲ 21 July;
▲ 21 October;
▲ 21 January.
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20.3 Monthly Reporting
Determination of One Month Tax Periods
The Taxation Commissioner must determine
that the tax periods that apply to you are
each individual month if:
▲ Your annual turnover exceeds the tax
period threshold ($20 million per
annum); or
▲ You will be carrying on an enterprise in
Australia for less than three months; or
▲ You have a history of failing to comply
with tax law obligations; or
▲ Your income year is not the same as the
financial year (that is, does not end on
30 June).
Note: If you are a charity (as most Church
entities will be) and your income year
does not end on 30 June, you will not be
required to have monthly tax periods.
Election of One Month Tax Periods
If your turnover is less than $20 million
per annum you may still choose to have
one month tax periods.
Your tax periods will be each individual
month if you so notify the Tax
Commissioner on the approved form. Your
election to have monthly tax periods takes
effect on the day that you specify in the
notice. However the day specified must be
1 January, 1 April, 1 July or 1 October.
You can withdraw an election to have
monthly tax periods but not for at least
12 months.
Cash Flow Effect
For discussion of the cash flow effect of
monthly reporting see Chapter 20.
Period End Dates
Monthly tax periods are each calendar
month ending on the following dates:
▲ 31 January;
▲ 28 February;
▲ 31 March;
▲ etc.
Reporting Dates
The due date for lodgment of your
Business Activity Statement is the 21st day
of the month following the end of the
monthly tax period. In respect of the tax
periods in the previous section, Business
Activity Statements must be lodged on or
before:
▲ 21 February;
▲ 21 March;
▲ 21 April;
▲ etc.
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20.4 Business Activity Statement
An entity which has registered for GST will
report its tax entitlements and obligations
on a new single form called a Business
Activity Statement (BAS).
You will claim input tax credits and
account for GST payable on your BAS at
the end of each tax period.
The difference between the GST which you
charge on your supplies to others and the
GST included in the purchase price of your
acquisitions is the amount that you owe to
or are owed by the ATO. You pay amounts
owing to the ATO when you lodge your
BAS. If your credits are greater than the
amount of GST payable, you will be
entitled to a refund.
Payments and Refunds of GST
The amount you have to pay to the ATO is
the difference between:
▲ The GST you include in the price of sales
you make; and
▲ The input tax credits you are entitled to
for GST included in the price paid on
things used in your organisation;
▲ This amount has to be paid on or before
the 21st day of the month following the
end of your tax period. You pay the
amount when you lodge your BAS.
If the amount of input tax credit owed to
you is greater than the GST on your sales,
you will receive a refund. The ATO must
pay this amount within 14 days of you
lodging your BAS. The ATO will pay you by
direct credit into your bank account.
Pay As You Go (PAYG) Withholding
When you lodge your BAS you also
account for amounts of tax which you
have withheld from employees and
unregistered persons whom you have paid.
Lodgment
You can lodge your BAS on the pre-printed
form supplied by the ATO or you can lodge
it electronically using the internet.
Electronic Lodgment Threshold
If your annual turnover is greater than
$20 million per annum then you must
lodge electronically.
Professional Advice
In most cases the simplest method will
be to account for GST on a quarterly
basis. However if you already prepare
your accounts on a monthly basis you
may wish to complete a BAS for each
accounting cycle.
If contemplating a change of accounting
method it is recommended that
professional advice be obtained.
A copy of a DRAFT BAS follows:
2 0 . R e p o r t i n g t o t h e A u s t r a l i a n Ta x a t i o n O f f i c e ( AT O )
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2 0 . R e p o r t i n g t o t h e A u s t r a l i a n Ta x a t i o n O f f i c e ( AT O )
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2 0 . R e p o r t i n g t o t h e A u s t r a l i a n Ta x a t i o n O f f i c e ( AT O )
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N o t e s
Notes
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Appropriate systems are the key to
managing the GST.
The systems that are in place in Catholic
Church organisations range from
sophisticated computer systems to basic
hand written records. Depending on the
size and nature of the organisation, some
systems will produce only basic accounting
data, whereas others will produce
comprehensive management reports.
The introduction of GST provides an
opportunity for all Catholic Church
organisations to review their current
systems. This review should not just focus
on accounting for GST; it should also
consider how the information that is
required for GST compliance purposes can
be captured and used to assist in the
effective management of the organisation.
A structured reporting system reduces
room for error and enables the users to
have a greater level of confidence in the
accuracy and usefulness of the information.
Accounting for GST will be a relatively
simple matter if time is taken before its
introduction to develop and install the
appropriate systems.
The purpose of this material is to provide
some guidance in this area.
21.1 What is a System?
A system is a series of processes which
provide timely, relevant and accurate
information that enable your organisation
to make informed decisions.
For a system to be effective, the procedures
should be documented and performed
consistently throughout an organisation.
For example:
Systems for wages
▲ Employees are paid correctly for the
hours they work;
▲ Pay rates are monitored to ensure that
they are in line with market rates and
legislated levels;
▲ Tax deductions and FBT are paid on time
under the new PAYG system; and
▲ Leave entitlements are correctly calculated
and recorded.
Regardless of what the system is used for,
the following features should always be
evident:
▲ The system needs to have a defined
purpose;
▲ The system must be managed in a
methodical way;
▲ The processes need to be completed in a
timely manner; and
▲ The system needs to have checks and
balances in place.
Although not all the systems that exist in
organisations are documented, those that
are vital to the continuing operation
should be. They should not only be
documented but, equally as important, the
documentation should be kept up to date.
Documenting systems enables the
procedures to be easily followed and
allows your organisation to incorporate
changes and new procedures.
Checks and balances are required in every
system to make sure that the information
generated is valid. Checks and balances are
essential to preserve the integrity of the
information. They are also needed to
ensure that the systems are applied
consistently.
2 1 . S y s t e m s
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21.2 Why are Systems Important?
The importance of systems cannot be
underestimated when it comes to effectively
running your organisation.
The systems in your organisation need to
be clearly understood by all those who
contribute to the administration of the
organisation. Documentation of systems
supports and reinforces this aim.
Systems are important to ensure that your
organisations and any affiliated bodies,
operate effectively.
A good management system should:
▲ Assist in making informed decisions;
▲ Adapt to any changes;
▲ Give procedural guidelines to staff ;
▲ Protect staff health and safety by
providing a safe working environment;
and
▲ Provide relevant, accurate and timely
information as required.
Good management systems are particularly
important in a GST environment given the
reporting requirements and deadlines
imposed by the law and the penalties that
can be imposed by the ATO for non-
compliance.
21.3 Why do Systems Change?
All organisations, including those of the
Catholic Church, need to cope with
constant change. These changes come in
many different forms. Some of these are
the result of technology, for example,
e-mail; other changes are the result of
changes in personnel or legislation.
The environment in which Catholic Church
organisations are operating today is
constantly changing. The changes
associated with the introduction of GST are
typical of the environmental changes your
organisation is facing. Changes of this type
require organisations to constantly update
their management systems.
Organisations with good systems and a
willingness to adapt will have a greater
chance of avoiding problems and taking
advantage of the opportunities that the
changing environment may provide.
Where you cannot avoid change, make
change work to your advantage.
Often where there are poor systems in
place, it is left to one person to accept
responsibility for ensuring that all
activities are undertaken in an efficient
manner and that appropriate records are
kept. Introducing, operating and
maintaining effective systems provides a
tool to enable the “hands on manager” to
delegate responsibilities, but still have
confidence that the organisation will
continue to operate efficiently and
effectively.
Maybe your organisation has no
documented systems for the day to day
running and changes to procedures are
generally made on a reactive basis. This
can result in changes being made on an ad
hoc basis and this is not always effective or
efficient.
When changes are made to systems or new
systems are developed, it is essential to
ensure that the information the system
provides is of greater benefit to the
organisation than the information
previously available.
If the systems are inadequate, people may
still operate the organisation reasonably
well. However if procedures are formalised
by setting up documented systems, the
situation can be improved substantially
through the provision of appropriate
information to improve the effectiveness of
their decisions.
21.4 The Operations Cycle
The operations cycle diagrammatically
demonstrates the way information flows
through a Catholic Church organisation
and how that information can be used to
produce relevant reports on organisational
performance.
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2 1 . S y s t e m s
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Informationis gathered
Informationis classified
Transactionsare processed
Transactionsare checked
Transactionsare actioned
Transactionsare recorded
Reportsare produced
What do youacquire/supply?
Gather ALL relevantdocumentation
Tax invoices ALLreceived/issued
Identify GST categoriesfor each item
Record eachitem correctly
System gathersinformation for the BAS
GST return completedand submitted on time
The introduction of GST on 1 July 2000 will impact on Catholic Church organisations and their
operations. The systems already in place need to be adapted to deal with GST at every stage of
the operations cycle.
The cycle for GST
N o t e s
Notes
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In looking at different activities, measuring
the performance of these activities and
reporting, it is very important not to
overlook the people involved in the
activities. This is also very important when
systems to deal with GST are being
developed. It is vital to recognise that
many people within your organisation are
likely to be affected by GST, and they will
have a role to play. This will depend on the
activity they are involved in.
Staff will need to:
Outflows (selling)
▲ Understand that the prices of all goods for
sale are to be stated as ‘GST inclusive’;
▲ Recognise transaction types and the GST
consequences, that is whether the sale is
a taxable supply or is GST-free, at the
point of sale;
▲ Know the rules for issuing a tax invoice;
and
▲ Understand the correct procedures for
refunds, issuing credit notes and
adjustments.
Inflows (buying)
▲ Understand the classification of each
transaction for GST purposes; taxable
supplies, GST-free supplies or input
taxed supplies;
▲ Know the GST status of suppliers
(unregistered, ABN registration, or GST
registration) before ordering;
▲ Know how to deal with cash purchases
including the GST component;
▲ Know how to record payments made by
cheque or cash including GST;
▲ Know to obtain tax invoices for all goods
or services acquired, which cost in
excess of $50 + GST;
▲ Know to obtain cash receipts for all
goods and services acquired, which cost
less than $50 + GST; and
▲ Understand and follow the procedures
for filing and recording tax invoices.
In addition, office staff will need to:
▲ Understand the GST status of each
transaction processed, that is, taxable
supplies, GST-free supplies or input
taxed supplies;
▲ Know how to issue appropriate tax
invoices for goods or services provided
by the organisation, reconciling total
taxable supplies, GST-free supplies or
input taxed supplies with the total
invoices issued;
▲ If using a cash based system, ensure
bank deposits are analysed into taxable
supplies, GST-free supplies, and input
taxed supplies;
▲ Know how to account for credit card
transactions;
▲ Understand how to process tax invoices
received from creditors;
▲ Know how to deal with adjustment
notes, credit notes, and refunds;
▲ Understand and follow the rules for
reconciling all the accounts; and
▲ Understand the attribution rules which
determine the tax period in which a
transaction is accounted for, for GST
purposes.
Educating Staff
In modifying or developing systems to
record and account for GST the procedures
that are developed and put in place must
be user friendly. These procedures must be
in a form that enables staff to follow them
without being technical experts in GST.
Adequate training of staff must be
provided to assist them in gaining an
understanding of how the GST operates,
and what effect the GST will have on the
operations of the organisation and their
roles within the organisation. They must
then be trained in the systems in place in
your organisation to manage the GST.
A crucial risk management procedure is to
ensure that all staff are adequately trained.
2 2 . S y s t e m s a n d S t a f f
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In developing the procedures the following
factors must be taken into account:
▲ The Chart of Accounts needs to be
suitably modified to classify the various
types of supply made and acquired: GST
supplies, GST-free supplies, and input
taxed supplies, by activity where
appropriate;
▲ Setting up procedures to ensure that
source documents, discussed in Chapter 23,
will be coded correctly to indicate the
GST status of all supplies made or
received;
▲ Ensuring that documentation issued
by the organisation complies with the
tax invoice and adjustment note
requirements and facilitates accurate
recording;
▲ Reviewing current procedures to ensure
that the debtors and creditors records
capture and classify GST information in
an efficient and effective manner;
▲ Ensuring cash flow management
procedures are adequate to cope with the
impact of GST;
▲ Ensuring that relevant totals can easily
be obtained from the system for
entering on the BAS, either from a
computerised or a manual recording
system;
▲ Ensuring that staff understand and can
apply the attribution rules; and
▲ Reviewing procedures to ensure that
records are kept up to date at all times to
enable the completion of the BAS within
21 days of the end of each tax period.
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As with any change current systems need
to be reviewed and new processes and
procedures put in place to adapt to the
introduction of GST and the entire PAYG
system.
Steps should be taken to:
▲ Identify your organisation’s activities;
▲ Classify these activities into GST
transaction types;
▲ Identify your organisation’s information
and reporting systems;
▲ Identify the ATO requirements for
reporting - the requirements of the BAS;
and
▲ Adapt the system to fit these requirements
- the Chart of Accounts and the records
produced.
Systems will need to be updated to cope
with transaction types that have different
GST consequences. This could occur for
both income (receipts) and expenses
(payments), including capital transactions.
23.1 Supplies & Acquisitions
The first step for a Catholic Church
organisation in preparing its systems for
the introduction of GST is to identify the
supplies it makes and the supplies it
acquires.
The identification of the various goods and
services of a Catholic Church organisation
is essential in deciding what changes are
required to the current systems.
In undertaking an identification of the
supplies made by your organisation, it will
be necessary to consider all of the various
activities undertaken by the organisation.
A good starting point is the latest set of
financial statements.
Supplies made by a Catholic Church
organisation include:
▲ The provision of religious ceremonies/
services;
▲ Sales of goods, both donated second-
hand goods and new goods;
▲ Sales of newsletters, magazines, books
and candles;
▲ Hire of facilities;
▲ Rent of property;
▲ Collections; and
▲ Donations.
Acquisitions by a Catholic Church
organisation include:
▲ All goods and services such as stationery,
electricity and telephones; and
▲ Capital acquisitions including buildings
and equipment.
23.2 GST Status of Transactions
Different activities have different GST
consequences.
The need to identify the different activities
for GST purposes is essential to enable the
transactions connected with that activity
and the GST consequences to be recorded
appropriately.
The supplies of your organisation will fall
into the three main GST supply categories,
being, taxable supplies, GST-free supplies
and input taxed supplies (Refer to
Chapter 8 for detail on supply categories;
refer to Chapter 11 for a detailed analysis
of church transactions.)
Taxable supplies made by a Catholic
Church organisation might include:
▲ The receipt of a capital grant;
▲ Rent of commercial premises;
▲ Sale of assets and commercial property;
▲ Hire of facilities; and
▲ Donations received for a specific
purpose.
Taxable supplies acquired by a
Catholic Church organisation
These might include:
▲ All goods and services such as stationery,
electricity and telephones; and
▲ Capital acquisitions including buildings
and equipment.
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Input taxed supplies acquired by a
Catholic Church organisation
These might include:
▲ Interest earned on investments.
Input taxed supplies made by a
Catholic Church organisation
These might include:
▲ Residential accommodation provided at
full market rate.
GST-free supplies made by a Catholic
Church organisation
These might include:
▲ Collections;
▲ Religious ceremonies;
▲ General donations;
▲ Piety stall sale of second hand donated
goods where the goods retain their
original character; and
▲ Piety stall sale of new purchased goods
where the goods are sold for less than
75% of the purchase cost or 50% of the
GST inclusive market value.
Each of the activities undertaken by a
Catholic Church organisation will have
its own GST issues.
Child care
In certain circumstances the supplies of the
childcare facility will be GST-free. This
means they are not required to charge GST
to the parents but can still claim the GST
on their expenses and purchases. Again
separate analysis of the income and
expenditure of this facility will assist when
the time to complete the BAS arrives.
Retail operations
Where a Catholic Church organisation sells
new books, clothing or similar items, all of
the sales will be subject to GST unless they
are sold for less than 75% of the purchase
cost or 50% of the market value.
The sale of second-hand goods that have
been donated to the organisation may be
sold without charging GST if they have not
been altered in any way between the time
of acquisition and subsequent resale.
Donations and Grants
This area is very important but is a
complex one for Catholic Church
organisations. It would be advisable to
seek advice as soon as possible from your
Diocesan or Congregational contact, the
ATO or a professional adviser.
Generally when your organisation receives
a donation or a grant for a specific purpose
this supply may attract GST, and 1/11th of
the supply must be remitted to the ATO. On
the other hand, if a donation or grant is
unconditional, no GST would be payable.
Example:
The parish receives a government capital
grant to build a refuge for homeless
men:
Total Grant $550,000
GST (1/11th) $50,000
$500,000
23.3 Source Documents
To provide GST information for completion
of the BAS, the system, whether manual or
computerised, will utilise the following
source documents:
▲ Tax invoices received from suppliers;
▲ Tax invoices issued by your organisation;
▲ Bank statements/ bank reconciliations/
cashbooks;
▲ Ledgers, and other summarised
information;
▲ GST calculation sheets;
▲ Adjustments worksheets; and
▲ Guides and industry specific booklets
dealing with GST and the PAYG system.
Source documents are the documented
evidence that your organisation accumulates
when it processes transactions. This
evidence needs to be kept in a form and
manner that facilitates easy retrieval.
Therefore, you must ensure that your
existing filing system allows this, and if
not, change that system.
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For example, your organisation is unable
to claim an input tax credit for GST paid on
an acquisition unless a tax invoice is held.
Therefore, it will be appropriate to file tax
invoices to coincide with the GST tax
period in which the input tax credit was
claimed.
Examples of source documents
▲ Cheque butts
▲ Deposit slips
▲ Bank statements
▲ Tax invoices (from suppliers and issued
by your organisation)
▲ Pay slips
▲ Receipts
▲ Purchase Orders
▲ Credit notes
▲ Expense claim forms
▲ Quotations
▲ Petty cash vouchers
Why do we keep source documents?
We keep source documents to provide the
information needed to produce accurate
reports for use by management. In addition
to this function they provide the evidence
needed to prove that the organisation is
entitled to a refund of the GST it has paid
or, conversely, how much GST it needs to
pay to the ATO.
Controls need to be in place to make sure
the system achieves this purpose:
▲ Use standard source documentation that
suits your organisation and complies
with legislation;
▲ File it in a logical and ordered way,
consistent with the systems used; and
▲ Ensure everybody understands the need
for and use of the source documents.
Documentation generated
by your organisation
Your systems need to be designed to
produce documentation that complies with
the GST law, and that can be produced
when required.
In particular, the GST law dictates what
information a tax invoice must contain,
refer Chapter 23.3.2 for further
information. Also, tax invoices must be
produced within 28 days of one being
requested.
Review source documents at
time of transaction
Take time when the source document is
created or received to ensure all relevant
information is recorded correctly.
The more accurate and detailed the source
documents are, the more useful they
become, allowing more information to be
held in one place. Where possible source
documents should be cross-referenced to
provide additional detail if required.
Retention of documents
Under legislation source documents need
to be retained for certain periods of time.
The following records must be kept for five
years:
▲ End of financial year records such as
stocktake sheets, creditors lists, debtors
lists and depreciation schedules;
▲ Receipts for supplies including cash
register Z-tapes, receipts, deposit books
and bank statements;
▲ Acquisition and expense records including
payment records, invoices and statements,
receipts, cheque butts and log books; and
▲ Wages records including worker
payment records, employment
declarations, PAYE employer’s payment
books and superannuation records.
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23.3.1 Tax Invoices
The Tax Invoice is the Cornerstone of GST.
As noted earlier your organisation may not
only issue tax invoices, but will also receive
tax invoices from suppliers. Your organisation
will be able to claim back the GST included in
most of these invoices if you hold a tax
invoice. Therefore, you will need to ensure
that you receive invoices from your suppliers
that meet the legal requirements for tax
invoices. In addition, the coding, recording
and processing of those invoices becomes
very important to ensure the GST is treated
correctly in your accounting records which
will allow the production of accurate
information for reporting to the ATO.
The tax invoice is the single most important
source document in any GST system.
Procedures to ensure tax invoices are correctly
issued, and recorded and filed appropriately,
are crucial in a GST environment. The
requirements of a ‘tax invoice’ are an
extension of information normally appearing
on an invoice. You need to design a tax invoice
for your organisation that complies with the
legislation and confirm that your suppliers’
tax invoices comply with the legislation.
Only suppliers registered for GST must
issue tax invoices. Unregistered suppliers
do not charge GST, are not required to issue
tax invoices. If you make a purchase from
an unregistered supplier you are not
entitled to claim input tax credits for those
acquisitions.
Tax Invoice ChecklistFor the preparation of the BAS there are
certain details that need to be shown
on invoices issued by your organisation
for both credit and cash transactions.
The information required on a tax
invoice varies in accordance with:
▲ The amount of the supply;
▲ The GST status of the supplies made.
Specifically, there needs to be a split
between taxable supplies GST-free
supplies and input taxed supplies; and
▲ Who initiates the tax invoice - the
supplier, as in most cases, or the
recipient of the supply.
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OVER $50 TO $1,000 - WITHOUT GST OVER $1,000 - WITHOUT GST
The supplier’s ABN number
GST inclusive price of the supply
Shown prominently the words “Tax Invoice”
Issue date of the tax invoice
Name of the Supplier
Brief description of each item supplied
If the GST is 1/11th of the total price either indicatethe total includes GST or, the amount of GST
The supplier’s ABN number
GST inclusive price of the supply
Shown prominently the words “Tax Invoice”
Issue date of the tax invoice
Name of the Supplier
Brief description and quantity of each item supplied
If the GST is 1/11th of either, indicate the totalincludes GST or the amount of the GST
The ABN number or address of the receiverThe name of the receiver
With tax invoices it is not necessary to show
the GST component as a separate item
unless the GST is less than 1/11th of the
total. However you may wish to design your
tax invoices showing the GST separately to
facilitate record keeping both for yourself
and your client. If the GST component is less
than 1/11th of the total price the GST
amount must be shown separately so that
your client is able to identify the amount of
GST that has been included.
A tax invoice is not required for supplies
with a value of less than $50, without GST.
However, your organisation is entitled to
claim an input tax credit for the GST paid
on creditable acquisitions. Therefore, some
documentary evidence of such purchases
must be kept, such as purchase orders,
receipts, and cheque butts.
Requirements for Supplies
If a tax invoice is for a taxable supply and
a GST-free or input taxed supply, the tax
invoice must also show:
▲ Each taxable supply and the amount of
GST payable; and
▲ The total amount payable for the supply.
If your organisation issues invoices for mixed
supplies you may consider issuing separate
invoices for the different types of supply. This
may facilitate information capture.
When designing the tax invoices for use by
your organisation, consider:
▲ Designing one tax invoice to be used for
all supplies regardless of amount. The
design would need to include all the
information required on a tax invoice for
an amount greater than $1,000, and
would need to disclose separately the
GST for each class of items supplied; and
▲ Obtaining advice from your Diocesan or
Congregational contact.
Get the tax invoice issues right and you are
well on the way to dealing with GST (see
following pages).
Recipient Created Tax Invoices (RCII)
Generally tax invoices are issued by the supplier
of the goods or services. However, the GST
Legislation allows the recipient of a supply to
issue the tax invoice in certain circumstances.
RCIIs can be issued by recipients of taxable
supplies who are registered for GST when:
▲ The supply is a taxable supply of
agricultural products and the recipient
determines the value of the supply;
▲ The recipient of the supply is a
Government entity and certain
requirements are satisfied; and
▲ The recipient of the supply has an
annual turnover, including input taxed
supplies, of at least $20 million, and
certain requirements are satisfied.
In most cases, Church entities will not be
required to issue RCIIs. However, seek
assistance from your Diocesan or
Congregational Business Manager, a
professional advisor or the ATO if needed.
23.3.2 Bank StatementsThe bank statement provides the link
between the inwards and outwards
transactions of an organisation. It shows
the deposits made, interest earnt, cheques
issued and automatic payments made.
The bank statement provides the first
opportunity to reconcile the payments and
receipts you thought you made, against
what has actually happened. This is
particularly important when there are
automatic payments and direct deposits
into the account.
Some organisations may find that each
major activity undertaken is more easily
accounted for when each activity operates
its own bank account. This allows the source
documents for each to be easily identified,
collated, analysed and reported on.
Rules of thumb for bank statements:
▲ Keep them all for at least five years;
▲ Keep the statements for each bank
account separate;
▲ File in date order; and
▲ Complete a bank reconciliation on each
bank account at monthly intervals,
regardless of the GST tax period of your
organisation.
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TAX INVOICE
St Joseph’s ParishABN: 123 456 789
Date: 1 August 2000
Description Amount Total
Hall hire for the month July $200
GST $20
Total including GST $220
Supplier name
Supplier ABN
Must state it isa tax invoice
Issue date
Descriptionof supply
Amountexcluding GST
GST amount
State that the totalincludes GST
Amount payableincluding GST
TAX INVOICE
St Joseph’s ParishABN: 123 456 789
Date: 1 August 2000
To: St Joseph’s Primary School123 Music StreetAnywhere
Description Total
Building rent for July 2000 $1,000Cleaning for July 2000 $200
GST $120
Total including GST $1,120
Supplier name
Supplier ABN
Must state it isa tax invoice
Issue date
Quantity orvolume
Descriptionof supply
Amountexcluding GST
Recipient nameand address or
ABN
GST amount
State that the totalincludes GST
Amount payableincluding GST
For transactions with values over $1,000
Sample Tax Invoices
For transactions with values over $50 & under $1,000
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For mixed supply transactions with values over $1,000 – Taxable and GST-free
TAX INVOICE
St Joseph’s ParishABN: 123 456 789
Date: 1 August 2000
To: Mr & Mrs J Married45 Bliss RoadAnywhere
Qty Description Total
1 Marriage ceremony $500Hall hire $300
10 Flower arrangements $200Organist $150
GST $65
Total including GST $1,215
Supplier name
Supplier ABN
Must state it isa tax invoice
Issue date
Quantity orvolume
Descriptionof supply
Amountexcluding GST
Recipient nameand address or
ABN
GST amount
State that the totalincludes GST
Amount payableincluding GST
23.4 Adjustments
Adjustments are changes you may need to
make on your BAS to change your net GST
amount payable or refundable as the result
of an adjustment event.
An adjustment event is any event which
has the effect of:
▲ Cancelling a supply or acquisition;
▲ Changing the consideration for a supply
or acquisition;
▲ Causing a supply or acquisition to
become, or stop being a taxable supply
or creditable acquisition.
Provision must be made in your system for
adjustments to transactions which have a
GST component. Your system must have
controls which identify when an adjustment
has arisen. Also your system must produce
Adjustment notes when required that
comply with the GST legislation.
There are many types of adjustment which
will affect GST your organisation has already
paid to, or been refunded by, the ATO.
Adjustments will arise if:
▲ All or part of a supply or purchase is
cancelled;
▲ The price of a supply or purchase is
altered. For example, where you are
entitled to a volume or early payment
discount;
▲ There is a change to the purpose of a
purchase. For example, a microwave
purchased for the office is moved to the
residence for private use;
▲ You have a bad debt, or you fail to pay a
debt; and
▲ A supply becomes taxable or stops being
taxable.
Adjustments are reported on your BAS
in the GST tax period in which the
change happened and an adjustment
note is held.
Credit notes and refunds
Credit notes and refunds need to be
recorded for both financial reporting
purposes and for GST reporting purposes.
The effect on your organisation of
receiving a credit note or refund is to
decrease the input tax credit which can be
claimed on that purchase. The effect on
your organisation of issuing a credit note
or refund is to decrease the GST payable to
the ATO on that supply.
Bad debts
Bad debts are an issue for organisations
registered on an accrual basis.
If your organisation is registered for GST
on an accrual basis you are required to pay
the GST on taxable supplies to the ATO
regardless of whether payment has been
received. Where a debt is unable to be
collected and is written off, or is over a
year old, your organisation will have paid
the applicable GST to the ATO but will not
have received the amount from the clients.
Your organisation is entitled to make an
adjustment for the GST overpaid to the ATO.
The system must have the capability to
deal with bad debts to ensure that any bad
debt adjustments are made. A system must
indicate when a debt reaches one year old.
Also, care must be taken to record any debt
written off, and the GST subsequently
claimed back, so that if it is ever received
in the future, the GST claimed back is
repaid to the ATO.
Transactions without a tax invoice
Some transactions undertaken by your
organisation will not be eligible for an
input tax credit claim because no tax
invoice is held, even though the original
acquisition was a taxable supply.
In these circumstances a claim cannot be
made for the GST paid and an adjustment to
the totals may be needed. A system needs to
be in place to identify situations where tax
invoices have not been received and to
ensure that the correct adjustment is made
to the claim in the relevant tax period. This
also highlights the importance of obtaining
a tax invoice from all your suppliers at the
time of the relevant transaction.
One way of avoiding this type of problem,
is to refuse to pay a supplier until a valid
tax invoice is received.
If the relevant tax invoice is received in a
subsequent GST period, the input tax credit
can be claimed at that stage.
The purchase and sale of capital items may
pose specific problems with tax invoices.
This can apply to the purchase of land and
buildings because invoices are not
traditionally issued by the seller of a
building. It may be wise to obtain
professional advice in such cases.
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Note: When the next BAS is prepared, 1/11th of the amount refunded, $5 in this case, will be used to reducethe amount of GST payable.
Sample Adjustment Note
ADJUSTMENT NOTE
St Joseph’s ParishABN: 123 456 789
Date: 7 August 2000
To: Mr & Mrs J Married45 Bliss StreetAnywhere
Short supply of flowers for marriageceremony
Tax invoice date: 1 August 2000
Original price, inc GST $220Adjusted price, inc GST $165
Amount refunded, inc GST $55
Supplier name
Supplier ABN
Must state it isan adjustment note
Issue date
Explanation forthe adjustment
Tax invoice date
Original price ofsupply including GST
Recipient name andaddress or ABN
Adjusted price ofsupply including GST
Amount refunded
N o t e s
Notes
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You must record in your accounting
systems the information from all of the
source documents. Your method of recording
information can be either in manual or
computerised form. The usual place where
all the information is collected is in the
General Ledger. The Chart of Accounts
determines the way in which transactions
are recorded in the general ledger.
The first step is to design the Chart of
Accounts to allow the appropriate
recording of all the transactions of your
organisation. Remember, your organisation
will provide and receive a mixture of
taxable supplies, GST-free supplies, input
taxed supplies, and other supplies (if you
are dealing with organisations or
individuals that are not registered for GST).
Each tax period your organisation is
entitled to a refund for GST paid on most of
its acquisitions (refer to Chapter 11 for a
detailed analysis), and is required to
submit to the ATO any GST collected on
taxable supplies (refer Chapter 11 for a
detailed analysis). Therefore, it is important
that you are able to isolate the GST content
(if any) of each transaction that you record
in your general ledger to make sure you
record the maximum input tax claim
available, as well as accurately calculate
the GST collected by you on behalf of the
ATO. This will involve the analysis of the
source documents for each transaction and
the recording of any GST amount to a
separate GST account in the general ledger.
The information provided by the systems
should enable you or your managers to
make appropriate decisions about the
organisation. In addition the systems
should provide all the information needed
to complete your BAS.
Therefore, when designing your Chart of
Accounts you need to consider:
▲ What are the financial reporting needs
of your organisation. Determine the
reports required and the information
each report needs to contain. Generally,
the financial reports needed will include
the Income and Expenditure Statement
(Profit and Loss Statement), the
Statement of Assets and Liabilities
(Balance Sheet), Cashflow Statements,
and Budget Reports;
▲ What information needs to be reported
in the BAS (refer Chapter 20 for a
detailed list); and
▲ Any restrictions arising from your choice
of accounting system.
The Income and Expenditure reports used
for the financial business decisions of the
organisation will be GST exclusive if
registered for GST. However, the figures
entered on the GST portion of the BAS will
be on a GST inclusive basis (this means the
total price paid including GST). Therefore,
the GST amount of a transaction should
always be coded to a specific GST code in
the general ledger (GST payable for GST on
sales, and GST receivable for the GST on
creditable acquisitions). The Chart of
Accounts should be designed so these GST
accounts are not Income and Expenditure
accounts. GST payable is a liability account
and GST receivable is an asset account.
The balance in the GST accounts in the
general ledger (GST payable being GST
received from clients, and GST receivable
being GST paid to suppliers) should equal
the GST refund, or the total GST payable to
the ATO.
However, if an entity is not registered for
GST any GST paid would be an expense
item and the Chart of Accounts should
reflect this situation.
Before designing your Chart of
Accounts contact your Diocesan or
Congregational administration.
2 4 . G S T S y s t e m s - R e c o r d i n g
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2424.1 Computer or Manual
If you are registered for GST it does not
matter whether you use a computerised
accounting system or a manual cashbook
system. Both must be changed to ensure
that all the information required for
completing the BAS is available when
required.
There are a number of computerised
general ledger packages available which
will have the capability to handle the
introduction of GST.
When making the decision whether to
adopt a computerised approach to record
keeping, an organisation must ensure that:
▲ The benefits achieved will be greater
than the costs incurred. Costs include
the once off purchase of computer
equipment and software together with
ongoing operational costs;
▲ The software system purchased will suit
the organisation, both management and
staff, and its information needs;
▲ The software system will provide the
information required to meet both the
needs of the organisation and the ATO.
Any software purchased should have
ATO approval;
▲ It is well structured with supporting
documentation that is easily useable;
and
▲ The system is adaptable to cope with
changes to future information needs.
If your organisation is currently operating
a computerised system you still need to
work through this range of issues to
ensure that all activities and relevant
transactions are accounted for, and can be
reported on correctly for GST purposes.
A sample cashbook using a spreadsheet
has been developed for parishes of the
Archdiocese of Adelaide. This spreadsheet
can easily be adapted to meet the specific
needs of your organization. It is available
from the Australian Catholic Church
Tax Working Group website at
www.tax.thechurch.com.au.
Before deciding on which accounting
system to use or how to adapt your
existing accounting system obtain advice
from your Diocesan or Congregational
contact.
24.2 Income & Expenditure
If your organisation accounts for GST on
an accrual basis it is important that
accurate debtors and creditors records are
kept. These records are needed to accurately
calculate the GST liability/refund at the end
of each GST tax period.
The use of a creditors and a debtors systems
allows your organisation to capture GST
information in the system at the ‘data entry’
point. Therefore, your systems must be
correctly designed to capture all the relevant
information and to determine when this
information has not been entered.
Income
Details that need to be recorded in your
records in respect of each receipt of funds:
▲ Date invoice issued by you or date of
cash sale;
▲ Relevant details of receipt where no
Tax Invoice is available (input taxed
supplies);
▲ Total amount deposited; and
▲ Split between each category for GST
purposes (where not already recorded
in the debtors system).
ExpenditureYour organisation will make payments by
cheque, directly from the bank account, by
credit card, or out of petty cash. Cash
payments, including petty cash, should be
kept to a minimum. The reason is to
ensure that there is a permanent source
document that can easily be referred to.
Where cash payments must be made, a
system needs to be in place to ensure they
are correctly accounted for.
Details that need to be recorded in the
system for each payment transaction:
▲ Date of invoice and ultimately, date
paid and cheque number;
▲ Supplier’s name and details;
▲ Payment total;
▲ Identification of the type of supply;
taxable, GST-free, or input taxed.
Totals of each supply type to be
accumulated as well; and
▲ The GST content of taxable supplies.
24.3 Irregular Transactions
Your system needs to be able to deal with
transactions that do not occur on a regular
basis. These may include:
▲ The purchase of an asset by way of bank
loans, or instalment credit terms;
▲ The trade-in of an asset on another; and
▲ A barter transaction.
In all these circumstances there is a GST
effect.
▲ All GST registered entities can claim the
full input tax credit on a financed asset
as payment has been made to the
supplier.
▲ When an old asset is traded in on a new
asset, the GST legislation will require a
two-part transaction to accurately record
GST liability. The organisation that has
traded the old asset can be regarded to
have made a supply to the vendor of the
new asset in return for consideration,
the trade-in allowance. The sale of the
new asset is clearly a supply for
consideration, the full purchase price.
The effects of this transaction are set out
in the following example.
Example
A parish decided to upgrade a photocopier.
After trading in the old photocopier the
new photocopier would cost $5,700. The
trade in value was $700.
The transaction is reflected as follows:
Trade in $700 GST supply made
Cheque paid $5,700
Photocopier $6,400 GST supply received
Your accounting system will need to
record the supply of the old photocopier
as a taxable supply, for a price if $700.
Of this 1/11th is GST payable to the ATO.
Your accounting system will also need to
record that a new photocopier has been
acquired at a price of $6,400. Of this 1/11th
will be able to be claimed back from the
ATO as an input tax credit. A tax invoice
must be obtained from the dealer for
$6,400, and the organisation must issue
the dealer with a GST invoice for $700.
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N o t e s
Notes
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A key feature of any financial system is its
ability to produce relevant and timely
reports within the operational cycle. After
1 July 2000 an additional aspect of
financial reporting will involve transactions
attracting GST.
Ideally the financial system used should be
able to produce reports which facilitate the
completion of the GST portion of the BAS
simply and efficiently. Remember that the
BAS must be lodged with the ATO by the 21st
day of the month following the end of your
GST tax period (refer Chapter 20) or your
organisation can be penalised by the ATO.
It is worth investing time now to ensure
that the system can accumulate and report
the correct information from 1 July 2000 to
facilitate this.
In addition to the usual reports such as
Statements of Assets and Liabilities,
Income Statements, Budget Reports and
Cashflow Statements, you will need to
modify existing systems to accumulate the
information required to complete the BAS
under the following categories:
▲ Total supplies from all sources;
▲ Total taxable supplies made;
▲ Total GST-free supplies made;
▲ Total input taxed supplies made;
▲ Total acquisitions, separated into capital
and revenue items;
▲ Total acquisitions for making input
taxed supplies ;
▲ Total acquisitions with no GST in
the price;
▲ Total acquisitions for private usage;
▲ Total acquisitions that are not income
tax deductible purchases;
▲ GST charged to, and collected from
clients which is payable to the ATO;
▲ GST paid to suppliers of goods and
services for which an input tax credit is
due from the ATO;
▲ Tax withheld from payments made to
suppliers without an ABN;
▲ Total salaries and wages;
▲ PAYE (PAYG) withheld from salaries &
wages;
▲ Fringe Benefits Tax (FBT) payable; and
▲ Adjustments arising from alterations to
figures reported in previous returns.
Attribution Rules
When designing and selecting your
systems to produce accurate GST reports it
is also important that you understand
what is meant by the term “attribution
rules”. These are rules that are used to
determine in which GST return period a
transaction is recorded for the purposes of
accounting for GST. These will be different
depending on whether you use a cash or
an accrual basis of accounting for GST.
Basically the rules are as follows:
Cash BasisSupplies made by the organisation are
deemed to be made in the GST tax period in
which a payment is received in respect of
the supply. Where part payment is received
the supply is made in that GST period to
the extent of the payment actually
received. The balance of the supply is made
in subsequent periods, to the extent of the
payments received in subsequent periods.
The date the invoice is issued in respect of
the supply is immaterial.
Supplies acquired by the organisation
are deemed to be acquired in the GST tax
period in which a payment is made in
respect of the supply. Where part payment
is made the supply is acquired in that GST
period to the extent of the payment made.
The balance of the supply is made in
subsequent periods, again to the extent of
the payments made. A valid tax invoice
must be held at the time an input tax credit
is claimed regardless of the time of supply.
Accrual BasisSupplies made by the organisation are
deemed to be made in the earlier of the GST
tax period in which any payment is
received in respect of the supply, or the
period in which a tax invoice is issued.
Supplies acquired by the organisation
are deemed to be acquired in the GST tax
period in which a valid tax invoice is
received in respect of the supply.
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25Typical flow chart of reports generated from systems
FinancialInformation
BAS
Processingdata
Storage ofdata
Recordkeeping
Creation ofsource
document
Activity
Transactions
Decision -making
Reportingof information
Cash FlowStatement
IncomeStatement
Statement ofassets andliabilities
Budget andvariances
AssetRegister
WithholdingTaxes
GSTFBT
PAYE
N o t e s
Notes
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N o t e s
Notes
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Risk Management is the implementation of
controls to minimise and manage the risks
your organisation faces with the
introduction of the GST. Such controls
minimise losses to your organisation
which could arise.
Your organisation needs to design a risk
management program:
▲ Identify the risks;
▲ Evaluate the risks by determining the
probability that such an event will occur
and what will be the resulting loss. Then
prioritise the risks identified on the basis
of the evaluation;
▲ Design risk management procedures to
minimise the risks identified. When
designing the procedures you need to
also take into account the costs of
implementing such procedures;
▲ Implement the procedures including
training of staff; and
▲ Continually review the procedures to
ensure they are operating as designed,
that the staff are adhering to the
procedures, and that the procedures are
adequate given any changes in the
organisation or to legislation.
26.1 Misclassifying Supplies
The incorrect classification of supplies for
GST purposes can result in losses to your
organisation.
The misclassification of a taxable supply
as a GST-free supply means GST will not be
collected from your customer. However,
your organisation is liable to pay the
applicable GST to the ATO. Therefore,
1/11th of the value of the supply will need
to be remitted to the ATO, resulting in a
monetary loss to your organisation.
This risk can be managed by committing
time to identify each type of supply your
organisation makes. Seek advice from your
Diocesan or Congregational contact, a
professional advisor or the ATO when
unusual or irregular supplies occur.
26.2 Incorrect Recording &
Reporting of GST
Even if supplies are correctly identified,
your organisation can face monetary loss if
the recording and/or reporting systems are
inadequate. Inadequate recording and/or
reporting systems can result in an incorrect
BAS.
If GST collected on taxable supplies is not
identified and recorded in the accounting
system as a liability this amount will not
be reported on the BAS and remitted to the
ATO. This exposes your organisation to
penalties which the ATO can impose.
If GST paid on creditable acquisitions is
not identified and recorded in the
accounting system as an asset this amount
will not be reported on the BAS and
claimed back from the ATO.
These risks can be managed by
implementing a Chart of Accounts that has
been correctly designed, by training staff in
the correct treatment and recording of GST,
and by putting in place a check of the BAS
to supporting tax invoices.
26.3 Tax Invoices
Regardless of how your organisation
accounts for GST, either cash or accrual, a
valid tax invoice must be held in order to
claim an input tax credit. Incorrectly
claiming input tax credits exposes your
organisation to the risk of penalties
imposed by the ATO.
To manage this risk implement a procedure
where a supplier is not paid until they
provide a valid tax invoice. However, staff
need to also be aware that a tax invoice is
not required for supplies with a value of
less than $50 (without GST), or from
suppliers who are not registered for GST.
2 6 . R i s k M a n a g e m e n t
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26.4 Cashflow
The GST can have a significant effect on
the cashflow of your organisation. The
cost of supplies may increase. Your
organisation may be entitled to a refund
for the GST paid on these supplies.
However, this refund will not be received
by your organisation until 14 days after
you lodge your BAS. This can be up to
three months after you paid the GST, if
your organisation is reporting quarterly.
However, the GST can also have a positive
effect on your cashflow if you are
collecting GST on taxable supplies.
Cashflow needs to be managed to ensure
that your organisation has enough funds
to operate effectively, and to have the cash
to remit any GST payable to the ATO when
the BAS is lodged. An effective tool for
managing cashflow is the preparation and
monitoring of cashflow budgets.
26.5 Contracts
Under the GST legislation the obligation to
remit any GST to the ATO rests with the
supplier, not with the client. If your
organisation does not collect the GST from
your clients you must remit 1/11th of the
value of taxable supplies to the ATO.
Manage this risk by obtaining advice from
your Diocesan or Congregational contact or
a legal advisor before entering into any
contracts. This will ensure that supply
contracts contain the relevant clauses to
allow you to collect GST from the other party.
26.6 Insurance
Insurance will be a taxable supply for GST.
Therefore, your organisation will pay GST
on insurance premiums to the extent that
they provide cover after 1 July 2000. If
your organisation is registered an input
tax credit can be claimed for this GST paid.
However, you must notify your insurer of
the extent to which you can claim input tax
credits on your premium. This needs to be
done so you do not have a GST liability on
an insurance settlement. You need to notify
your insurer when you take out, or renew,
an insurance policy. You must notify your
insurer before 1 July 2000 if you have
already taken out, or renewed, a policy and
the next renewal date is after 1 July 2000.
26.7 Pricing
The change in the tax regime means a
change in the underlying costs to your
organisation. The prices being charged for
goods or services ‘sold’ need to be reviewed
in light of the GST. The ACCC has the
responsibility of monitoring prices for the
introduction of the GST and has the power
to impose very large penalties (up to $10
million for corporations and $500,000 for
individuals) for price exploitation.
Manage the risk of exposure to ACCC action
by developing and documenting a pricing
model, taking into account the ACCC
guidelines, and the estimated costs of your
organisation with the GST.
The ACCC guidelines in summary are:
▲ Prices should be reduced immediately to
pass on the full effect of tax reductions;
▲ Any increase in price based on the GST
should include a full offset for other
indirect tax reductions;
▲ No markup should be applied to the GST
component of price;
▲ Prices should reflect only actual, not
anticipated, tax increases; and
▲ Prices should change to ensure that the
net dollar margin remains the same (the
dollar difference between cost and price).
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The general principal is that GST applies to
all goods delivered and all services
performed after 1 July 2000. However,
during the transition to GST, this could
lead to the situation where some will
receive an unfair economic advantage and
others will suffer an economic loss.
The Government has introduced transitional
rules to ensure there is a smooth transition
to GST.
Transactions that will be affected by the
transitional rules are those that span the
implementation date of 1 July 2000,
including:
▲ Sales and purchases of goods and
services;
▲ Progressive supplies and prepayments
such as subscriptions;
▲ Purchases of motor vehicles; and
▲ Contracts.
27.1 Time of Supply
The time of supply, not the date of invoice
or payment, is the determining factor as to
whether GST applies to a supply. Therefore
it is essential that you determine the time
of supply for each supply spanning the
transition period.
The time of supply depends on what the
supply is. The general rules in respect of
supplies spanning the implementation
date are:
2 7 . Tr a n s i t i o n a l I s s u e s
27. Transitional Issues
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Example
Your parish rents the hall to the local
Tai Chi Club. The Club pays $55 on
26 June 2000, being rent of the hall for
July 2000.
The supply is made after 1 July 2000,
therefore GST applies to the supply and
$5 (1/11th of the $55) must be remitted
to the ATO by your parish.
Special transitional rules apply to:
▲ Supplies arising from contracts
spanning 1 July 2000;
▲ Rights granted for life;
▲ Periodic or progressive supplies;
▲ Construction agreements;
▲ Supply of rights; and
▲ Funeral agreements entered into prior
to 1 December 1999.
TYPE OF SUPPLY WHEN THE SUPPLY OR ACQUISITION IS MADE
Goods
Progressive SuppliesSuch as MaintenanceContracts
Services
Real Property Suchas Land or Landand Buildings
Any Other thing,for Example, Rights
When the goods are removed; or if the goods are not removed - whenthe goods are made available to the recipient; or if the goods are removedbefore it is certain that a supply will be made - when it becomes certainthat a supply has been made.
The supply is deemed to occur on a continuous and uniform basisthroughout the period
When the services are performed. Special provisions exist for suchsupplies made on a periodic or progressive basis
When the property is made available to the recipient. Specialprovisions exist for major construction agreements.
When the thing is performed or done. Special provisions exist for suchsupplies made on a periodic or progressive basis
These are general rules only.
27.2 Progressive Supplies
These are supplies that are made for a
period, or progressively over a period that
spans 1 July 2000. Such supplies are
deemed to be made continuously and
uniformly throughout the period. The
value of the supply made after 1 July 2000
will be subject to GST.
These rules apply regardless of how your
organisation accounts for GST, cash or
accrual.
Example
Your organisation enters into a
photocopier service contract for the period
1 March 2000 to 28 February 2001. Does
GST apply?
Yes! GST will apply on a pro rated basis.
The supply is pro rated over the 12
months, irrespective of when the
services are supplied.
1 March 2000 – 30 June 2000
No GST applies
1 July 2000 – 28 February 2001
Taxable supply
The supplier, if registered, will be liable
to remit 1/11th of the supply value from
1 July 2000 to the ATO. Your
organisation, if registered, will be
entitled to claim an input tax credit for
that amount.
Other examples of where this may apply:
▲ Subscriptions and memberships; and
▲ Warranties on motor vehicles, but not
where the payment for the warranty is
part of the purchase price of the vehicle.
27.3 Motor Vehicles
Generally input tax credits can be claimed
for the GST included in the price of both
operating and capital items. However,
there will be a phase in of input tax credits
on new motor vehicle purchases.
If your organisation was entitled to an
exemption from WST on the purchase of
new motor vehicles prior to 1 July 2000,
the phase in rules do not apply.
Also, there are no phase in rules for the
purchase of second-hand motor vehicles.
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The percentage is based on the vehicle being acquired and used solely for ministry purposes.
You need to introduce controls to ensure that the correct input tax credit is claimed on any motor
vehicle purchases.
DATE OF PURCHASE PERCENTAGE OF GST INPUT TAX CREDIT AVAILABLEPAYABLE THAT CAN BE TO ORGANISATIONSCLAIMED AS AN INPUT PREVIOUSLY ENTITLED TOTAX CREDIT WST EXEMPTION
From 1 July 2000 00 100up to and including30 June 2001
From 1 July 2001 50 100up to and including30 June 2002
From 1 July 2002 100 100onwards
27.4 Contracts
Supplies made on or after 1 July 2000
under contracts entered into on or after
8 July 1999 will be subject to GST. The
general rules of time of supply will
apply.
Special transitional rules apply to
contracts entered into before 2 December
1998 (when the GST bill was introduced to
Parliament) or before 8 July 1999 (when
the GST legislation became law), that:
▲ Are in writing;
▲ Identify a supply; and
▲ Identify consideration or a way of
calculating the consideration.
The impact of GST on such contracts
varies, depending on:
▲ Whether the contract is reviewable or
non-reviewable;
▲ The date on which the contract was
entered into;
▲ Whether full payment of the contract
value was made prior to 2 December
1998; and
▲ Whether the client is entitled to a full
input tax credit for the supply.
27.4.1 Non- reviewable ContractsNon-reviewable contracts are ones where
the price paid for the supply is fixed (or
calculated according to some specified
formula) and cannot be varied or reviewed
by either party to the agreement to take
account of the GST. It may contain
provisions that mean that the contracted
price does not include GST.
Note the following would be non-
reviewable contracts:
▲ Where there is a formula or set
calculation for the consideration and
therefore the consideration can vary.
Unless the formula or calculation itself
can be varied, the contract is non-
reviewable; and
▲ Where there is an inflation adjustment
clause (CPI).
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SCENARIO GST TREATMENT
Buyer entitled to a full input tax credit for thesupply. The contract was entered into prior to 8July 1999.
Buyer not entitled to a full input tax credit forthe supply. The contract was entered into prior to2 December 1998.
Buyer not entitled to a full input tax credit forthe supply. The contract was entered into after 2December 1998 and prior to 8 July 1999.
The contract was entered into and paid in fullprior to 2 December 1998.
Contract entered into after 8 July 1999.
GST-free for supplies made prior to 1 July 2005.
GST-free for supplies made prior to 1 July 2005.
Supplies made after 1 July 2000 will be subjectto GST.
GST-free regardless of whether the buyer isentitled to full input tax credits.
Supplies made after 1 July 2000 will be subjectto GST, regardless of whether the buyer isentitled to full input tax credits.
GST implications of non-reviewable contracts:
Organisations with contracts should seek
advice from their Diocesan or Congregational
contact, a professional advisor or the ATO.
27.4.3 Entity StatusThe GST treatment of supplies made on or
after 1 July 2000 under a contract entered
into prior to 1 July 2000 depends upon
whether the ‘buyer’ is entitled to a full
input tax credit for those supplies.
Your organisation will need to implement
system checks to determine this:
▲ First decide whether the ‘buyer’ is a
‘business’ entity or a private ‘consumer’.
Private consumers are not entitled to
claim input tax credits;
▲ If the ‘buyer’ is a ‘business’ entity
determine whether they are registered
for GST; and
▲ If they are registered for GST determine
whether they make input taxed supplies.
For example, they provide financial
services (banks), or the rent of
residential accommodation.
27.5 Funeral Agreements
Special transitional rules exist for funeral
agreements that override the general
contractual rules. The supply of a funeral
after 1 July 2000 under a contract prior to
1 December 1999 will be GST-free provided
the contract is paid in full prior to 1 July
2005, or a review date after 8 July 1999,
whichever is earlier. If the payment is made
after this time and the funeral is supplied
on or after 1 July 2000, GST will apply.
The supply of funeral services under
contracts entered into after 1 December
1999 will attract GST if the funeral is
supplied on or after 1 July 2000, regardless
of when payment is made
27.4.2 Reviewable contractsA reviewable contract is one that allows
reviews of the price of anything supplied
under the contract.
Contracts likely to be affected are those:
▲ For the supply to, or by, your organisation
of both goods and services;
▲ For the rent or lease of premises and/or
capital equipment;
▲ For the purchase of capital assets;
▲ For the sale of capital assets;
▲ For construction of major assets; and
▲ For other long term contracts.
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GST implications of reviewable contracts:
SCENARIO GST TREATMENT
Buyer entitled to a full input tax credit for thesupply. The contract was entered into prior to 8July 1999.
Buyer not entitled to a full input tax credit forthe supply. The contract was entered into prior to2 December 1998.
Buyer not entitled to a full input tax credit forthe supply. The contract was entered into after 2December 1998 and prior to 8 July 1999.
The contract was entered into and paid in fullprior to 2 December 1998.
Contract entered into after 8 July 1999.
Supplies are GST-free until the first opportunity toreview the price of any supplies, or 1 July 2005,whichever is earlier.
Supplies are GST-free until the first opportunity toreview the price of any supplies, or 1 July 2005,whichever is earlier.
Supplies made after 1 July 2000 will be subjectto GST.
GST-free regardless of whether the buyer isentitled to full input tax credits.
Supplies made after 1 July 2000 will be subjectto GST, regardless of whether the buyer isentitled to full input tax credits.
27.6 Stock on Hand
If your organisation is registered for GST
and is holding goods for resale on 1 July
2000 you may be entitled to a special GST
credit.
The credit is only available for stock held
for sale or exchange. It is not available for
goods to be consumed within your
organisation.
The credit, if available, can be claimed in
one BAS lodged prior to 22 January 2001.
New Stock
The GST credit available is equal to the
WST that was paid on that stock.
Second-hand Goods
The GST credit available is the lesser of:
▲ 1/11th of the amount paid for the good;
or
▲ The amount of GST payable when the
good is sold.
If your organisation holds stock for resale,
either new or second-hand, a stocktake
must be performed on 30 June 2000. This
stocktake must be documented and the
documentation needs to be retained for
five years. The calculation of the special
GST credit must also be documented.
Again, this must be retained for five years,
with any supporting documentation (for
example, purchase invoices).
27.7 Actions required now
▲ All existing contracts extending beyond
1 July 2000 should be reviewed;
▲ The GST implications on all the existing
contracts should be checked;
▲ The GST implications of new contracts
entered into from now until 1 July 2000
should be considered; and
▲ Consider what further actions may be
needed as a result of the above, for
example, contact a solicitor.
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GST Start-Up Assistance Office
www.gststartup.gov.au
GST Community Sector Assist Helpline
13 30 88
The Australian Taxation Office (ATO) -
Tax Reform Office
www.taxreform.ato.gov.au
Australian Competition and Consumer
Commission (ACCC)
www.accc.gov.au
The Catholic Church Tax Working Group
www.tax.thechurch.com.au
C o n t a c t s
Contacts
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